[ By Bobby Anthony ]The Supreme Court of India has quashed an earlier Reserve Bank Of India (RBI) circular which had banned trading in virtual currencies or cryptocurrencies like Bitcoin and allowed dealing in them.The judgment has been pronounced by a three-judge Supreme Court bench comprising Justice Rohinton Nariman, Justice Aniruddha Bose and Justice V Ramasubramanian.Earlier, an RBI...
The Supreme Court of India has quashed an earlier Reserve Bank Of India (RBI) circular which had banned trading in virtual currencies or cryptocurrencies like Bitcoin and allowed dealing in them.
The judgment has been pronounced by a three-judge Supreme Court bench comprising Justice Rohinton Nariman, Justice Aniruddha Bose and Justice V Ramasubramanian.
Earlier, an RBI circular on April 6, 2018, had restricted banks from facilitating transactions for cryptocurrency exchanges as well as traders.
The Supreme Court’s came in response to a petition filed by the Internet & Mobile Association of India (IAMAI) challenging the RBI circular issued on April 6, 2018, which had practically banned trading in cryptocurrencies.
The RBI circular had practically banned cryptocurrency trading in India by directing that all entities regulated by the RBI shall not deal in virtual currencies or provide services to facilitate any person or entity in dealing with or settling those transactions.
Entities regulated by the RBI which were already providing such services were told to exit the relationship within three months.
The RBI had given such entities three months to snap all banking relationships with individuals or businesses dealing in virtual currency. The ban was aimed at “ring fencing” the country's financial system from the private virtual currencies, deemed illegal by the government.
Even prior to April 6, 2018, the RBI had issued circulars cautioning users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies.
Challenging the ban, the IMAI which represents various cryptocurrency exchanges, argued that cryptocurrency is not strictly currency and is more in the nature of commodity, over which the RBI does not have powers to impose such a ban, especially in the absence of any law prohibiting cryptocurrency.
The IMAI also claimed that the RBI ban ended up curtailing legitimate business activity carried out through virtual currencies.
However, the RBI contended that right from 2013, it had been cautioning users of cryptocurrencies and that it considered cryptocurrency a digital means of payment which had to be nipped in the bud so that the payment system in the country is not jeopardized.
The RBI also argued that it is empowered to take decisions banning cryptocurrencies.