RBI Cryptocurrency Ban: In a significant judgement, the Supreme Court on Thursday struck down a circular issued by the Reserve Bank of India (RBI) which directed banks not to deal in transactions involving cryptocurrency. The Court held that the ban was 'disproportionate'.
A bench of justices Rohinton Nariman, Aniruddha Bose and V Ramasubramanian pronounced the judgement in a petition by Internet and Mobile Association of India (IMAI), an industry grouping that has challenged the ban.
The Bench allowed the petition on the ground of proportionality.
This was challenged by the Internet And Mobile Association of India and few other stakeholders in the Supreme Court.
Appearing for IAMI, Advocate Ashim Sood submitted that Reserve Bank of India lacked jurisdiction to forbid dealings in cryptocurrencies. The blanket ban was based on an erroneous understanding that it was impossible to regulate cryptocurrencies, Sood submitted, Live Law reported.
It was also argued that cryptocurrencies were not "currency" in the strict sense and that they could be termed as a medium of exchange or a store of value.
Senior Advocate Shyam Divan, appearing for RBI, disagreed and said that it was a mode of digital payment, which the RBI had the power to control.
In April 5, 2018, RBI issued a press release stating that virtual currencies (VCs), referred to as crypto currencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering. In view of the associated risks, banks were asked not to deal with crypto-related businesses.
“Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase/ sale of VCs”, the notification said.
RBI, in December 2013, cautioned users, holders and traders of virtual currencies, including Bitcoins, about the potential financial, legal and security related risks associated with it.
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