RBI REPLIES TO CRYPTO CURRENCY PETITIONS IN THE SUPREME COURT OF INDIA

The author ‘Crypto Kanoon’ is an Indian platform engaged in Crypto regulatory analysis and legal awareness. You can follow the author on twitter @cryptokanoon

The pending crypto litigation in the Supreme Court of India have become a focal point for the global crypto community as the crypto regulatory developments in India will have a great bearing on the Crypto industry worldwide.

The aforesaid pending litigations include a Public Interest Litigation by Mr. Vijay Pal Dalmiya Advocate who sought a ban on sale and purchase of Crypto currencies. The other petition advocates that the crypto currencies should not be allowed to operate in an unregulated space and the Government should either regulate the VC’s or ban them by a regulation. Internet and Mobile Association of India (IAMAI) has also filed an intervention Application to present their version on the issue as the outcome is going to have bearing on their interest. Recently, a Writ Petition was also filed by four crypto exchanges including Coindelta, Koinex, Throughbit and CoinDCX who assailed the RBI banking restriction as violative of Right to equality, Right to carry on trade and Right to life guaranteed to the citizens under Articles 14, 19 and 21 of the Constitution respectively which was also tagged with the on-going batch petitions.

Out of all the Respondents in the batch petitions, including Ministry of Finance (MOF), Ministry of Home Affairs (MHA), Ministry of Law & Justice (MLJ), Ministry of Electronic and Information Technology (MEIT), Stock and Exchange Board of India (SEBI), RBI, Income Tax Deptt. and Enforcement Directorate, only the RBI has filed its reply in the Supreme Court.

The salient points stated by the RBI are mentioned as under:

1. Court cannot interfere with the economic policies.

The RBI has stated that the Petitioner’s own view on the matter of policy which may be at variance with those of policy makers cannot be a basis of challenge against economic decisions taken by the Government until there is a clear violation of, or non-compliance by the State, of Constitutional or Statutory provisions. The Court indeed has power to strike down a law on the ground of want of authority but it cannot sit in Appeal over the policy of the Parliament in enacting a law and testing correctness of economic policies.

2. Bitcoin is not a ‘Currency’ under the existing laws of India.

The RBI stated that Crypto-currencies fall far short of being a true ‘Currency’ as there is no enabling provision under the existing laws to treat Bitcoin as currency. As per the relevant laws including Indian Coinage Act, 2011, Reserve Bank of India Act, 1934, Foreign Exchange Management Act, 1999 and the Payments and Settlement Systems Act, 2007, the Crypto currencies do not fit in any of the definitions of ‘currency’ or ‘money’ provided under the Indian law. Therefore, the question of RBI declaring them as legal or illegal does not arise.

3. Two committees constituted by the Government to Study Crypto currency.

Government through Ministry of Finance constituted an Inter-Disciplinary Committee (IDC) on 15th March, 2017 which is chaired by Special Secretary (Economic Affairs) with representatives from department of economic affairs, Department of Financial Services, Department of Revenue (CBDT), Ministry of Home affairs, Ministry of Economics and Information Technology, RBI, SEBI, NITI Aayog and State Bank of India to examine the, (1) present Status of Virtual currencies in India; (2) the regulatory approach adopted globally and; (3) to suggest framework for regulation in India. The RBI has given its views to the Committee and now the further course of action is dependent on the decision of the Government and the responsibilities delineated by it to regulatory and enforcement agencies.

The RBI has discussed about another committee which is chaired by Secretary, Department of Economic Affairs and comprising of representatives from which is constituted to study the issued related to Virtual currencies and propose specific action to be taken. Therefore, the RBI cannot unilaterally decide for the Government on the legality of Bitcoin.

Disclosure of RBI’s views on Crypto-currency

The RBI stated in its reply that it has shared its views with the Committee but it has not disclosed in its reply as to what stance/views on Crypto currencies it has shared with the Inter-Disciplinary committee.

Disclosure of the reason for putting banking restriction on Crypto

The RBI has only stated that it has adequately cautioned users, holders and traders of virtual currencies about the potential risks that they are exposing themselves vide press releases dated December 24th 2013, February 1st 2017and December 5th 2017. Apart from the aforesaid it has cited no ground on which it has brought in place the banking restriction circular.

Disclaimer: The views expressed in this article are personal and purely informative in nature.