Observations by the Supreme Court of India
Categories: Bitcoin
1. After determining that the RBI was a specialized statutory body that acted consistently and in good faith, the Supreme Court considered whether the ban on virtual currency trading was a “reasonable restriction” on a fundamental right guaranteed under Article 19 (1)(g). The proportionality test was used to determine reasonableness. The Apex Court concluded that the RBI had behaved within its authority, consistently, and with due diligence. Furthermore, the RBI’s demand for empirical data to establish harm to the conventional economy did not prevent it from taking pre-emptive actions if it saw proper.
2. The Court had also observed that though the RBI was found to be within its authority to publish the circular, the absence of proof of the “proportional damage” incurred by RBI regulated enterprises in dealing with cryptocurrency businesses led to the circular being struck down. Despite the RBI finding no problems with the running of these exchanges, the Supreme Court concluded that the circular isolated the banking sector from cryptocurrency exchanges. Before publishing the circular, the RBI did not look into the possibility of less invasive alternatives, such as regulating Bitcoin trade and cryptocurrency exchanges.
3. The Supreme Court stated that cryptocurrencies can be accepted as a form of lawful payment for goods and services and that payment systems can be controlled by the RBI.