RBI & Cryptocurrency Stakeholders Face-Off in Indian Supreme Court
With the looming threat of a blanket cryptocurrency ban in India, both the central bank and crypto stakeholders in the country continued their arguments before the Supreme Court.
Counsel representing the crypto side of the tussle argued on Tuesday (August 20, 2019) that the Reserve Bank of India (RBI) had no grounds to ban cryptocurrencies. The RBI for its part fell back to the well-worn argument of cryptos being used for criminal activities.
Regulate Cryptocurrency, Not Ban
In a Twitter thread of the court proceedings, Crypto Kanoon, an Indian source for crypto and blockchain news provided a detailed account of Tuesday’s hearing.
Counsel for the Internet and Mobile Association of India (IAMAI), Ashim Sood, in his opening argument, stated that the RBI’s actions were unfounded, unreasonable, arbitrary, and unlawful. According to Sood, the central bank acted without proper investigation or adequate knowledge of bitcoin and other cryptocurrencies.
RBI circular is void on the ground of vagueness. It gives no definition of Crypto and seeks to crack down on all indiscriminately.
A judgement is being read which holds that vagueness of rule is detrimental to its validity.
— Crypto Kanoon (@cryptokanoon) August 20, 2019
While acknowledging that digital currencies can be used for criminal activities such as money laundering, Sood noted that various governments and regulatory agencies across the globe have regulatory frameworks in place to combat such vices and protect investors.
The IAMAI counsel further listed jurisdictions in the U.S., the UK, and even the G20 countries provided regulatory guidelines for bitcoin and other virtual currencies, and said the RBI was supposed to tow the regulatory line instead of banning the nascent industry.
Also, Sood argued that the ban by the apex bank had little or no effect, as users still found ways such as peer-to-peer (P2P) trading to send and receive funds. While the apex bank is concerned about risks associated with cryptocurrency, money laundering, and volatility, Sood stated that India’s consumer protection and AML laws can be applied to bitcoin and other virtual currencies.
My Money, My Investment Choices
Following Sood’s arguments, Nakul Dewan, a Senior Advocate representing cryptocurrency exchanges, also presented his arguments before the Supreme Court. Dewan listed six areas that worry the Indian apex bank, with counter arguments.
Some of the “worrisome areas” include volatility, which Dewan said that it is also applicable to stocks. Another concern is hacking, which according to Dewan, digital banking suffers the same.
Dewan added that if the RBI thinks crypto lacks any “inherent value”, then even fiat is floating on thin air. Also, the issue of virtual currency platforms lacking authorization is unfounded, as there is no law that gives the RBI power to authorize exchanges.
Interestingly, Dewan said that investors had the right to invest funds in bitcoin and other cryptocurrencies even with the risks involved. The Senior Advocate stated that the money deposited in the bank belongs to investors and not the RBI or any bank.
The money deposited in the bank is not RBI's money or bank's own money. in fact it is my money.
— Crypto Kanoon (@cryptokanoon) August 20, 2019
The exchanges’ representative further said that since cryptocurrency was not money, it therefore would fall outside the monetary policy regulations. Also, the RBI should monitor the continuous development of the dynamic sector and create an appropriate regulatory framework
“Bitcoin and Other Cryptocurrencies are Ponzi Schemes” — RBI
The RBI, however, seemed ready to present its case, with Shyam Diwan representing the bank. According to Diwan, as opposed to Dewan’s argument, cryptocurrency has some monetary characteristics and the value of the digital currency is dependent on the people’s unanimity.
Diwan went on to state that the greatest fear of the central bank is the use of virtual currencies as a means of payment.
Apart from expressing its fears, the RBI counsel stated that bitcoin and other cryptocurrencies are nothing but Ponzi schemes, whose mining activities also pose environmental risks.
Diwan also mentioned that the industry had been plagued with hacks globally, which is one of the reasons the bank and the Indian government are wary of cryptocurrency and its associated risks.
Indian Government Needs to Wake Up
The cryptocurrency landscape in India has been all but stable in the last one year. Following the RBI’s ban, Indian virtual currency exchanges, like Zebpay, and Coinome, shuttered their services in the country to move to other jurisdictions with friendlier crypto regulatory frameworks.
Back in July 2019, CoinRecoil co-founder, Kunal Barchha, wrote an open letter to India’s Prime Minister, Narendra Modi, concerning the RBI ban and the government’s lukewarm attitude towards producing a robust crypto regulation. According to Barchha, the RBI took action without carrying out a thorough research or consulting with stakeholders in the industry.
The central bank continually sees cryptocurrency as an archenemy, as reports revealed that the RBI was the brain behind the call for bitcoin and crypto ban in the country, following a report by the inter-ministerial committee (IMF), recommending a blanket ban on virtual currencies.
However, experts believe that a bitcoin ban is bad for India. Blockonomi recently reported that Nasscom, a major Indian trade organization, said a blanket ban on bitcoin would have negative implications, and instead called for regulation of the sector.
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Osato Avan-Nomayo, Khareem Sudlow
