The Cryptocurrency judgment ?
Virtual currency exchanges have been effectively banned since 2018, but the Supreme Court recently gave them a boost in the case of Internet and Mobile Association vs. RBI. The Reserve Bank of India (RBI) prohibited organizations regulated by it from trading in or assisting transactions in virtual currencies in a circular dated April 6, 2018. The RBI attempted to ring-fence those enterprises operating in virtual currencies by cutting linkages between virtual currency exchanges and the traditional economy, without outright outlawing virtual currencies. The RBI’s competence to supervise India’s monetary and credit system included the regulation of virtual currencies, according to the Supreme Court. It did, however, rule that a complete prohibition on virtual currency exchanges was excessive and hence not a “reasonable limitation” under Article 19(2) of the Indian Constitution. Surprisingly, the Supreme Court found that the RBI lacked sufficient empirical evidence to show that virtual currencies had a negative impact on the traditional economy.
The petitioners’ main claim was that the RBI lacked the authority to control cryptocurrencies since they were neither ‘currency’ nor a ‘payment system,’ but rather ‘tradable commodities.’ It was further argued that trading in cryptocurrencies remained a lawful commercial activity in the absence of a legislative ban, and the challenged circular imposed an arbitrary and unconstitutional limitation on it. Furthermore, a complete ban on cryptocurrency trading was unreasonable because it violated the proportionality principle.
The RBI responded by claiming that cryptocurrency’s anonymity made it vulnerable to money laundering and terrorism financing. They further argued that widespread use of cryptocurrency could fundamentally undermine India’s credit system and monetary stability which was required to be controlled by the RBI has broad authority over the country’s economic policy.