RBI versus IAMAI at the supreme court

What has happened till now let’s have a look

The argument between RBI and IAMAI was quite engrossing but the more interesting part was not the argument but was that the judges on the bench were well aware of the matter and they understood that their decision will be a crucial one as the decision by the supreme court becomes the law of the land. 

The referred judgments in the arguments mainly say that the scope of the court’s intervention is limited when an expert committee like RBI has acted under its statutory power. 

But the counsel from IAMAI argued that the RBI was not well informed of how Crypto functions and took a statutory decision of implementing the blanket ban instead of taking a well-informed decision. 

It (RBI) only cited the illicit and illegitimate uses of Bitcoin and Other Virtual Currencies and mentioned that it can be used for terrorist financing. It may be noted that there are many more ways to finance illegitimate activities and other than this including the regulated currencies, no strong evidence was provided by the RBI. 

RBI ignored the technology and the groundbreaking uses of virtual currencies which can change the way we conduct transactions globally. RBI’s decision was biased and easy. It must be noted that the existing financial system which runs on Fiat currencies such as the US dollar and Indian rupees are used in illicit transactions and many other illegal uses and cryptocurrency should not be held responsible entirely for the same. The wrongs of a few can curtail the rights of many and this point was clearly ignored and well-argued at the supreme court.

There were no conditions applied but an outright decision by the RBI which was both criticized by the IAMAI lawyers and the judges themselves at the supreme court. No valid reason and research in any of their papers were found which said Crypto must be banned. 

The IAMAI lawyer also argued that there is not a single finding stating that Crypto is impacting the payment system and it was not even mentioned in the IMC report, on the contrary, RBI annual report is available on record which says that there is a negligible risk from Crypto, then why was such a strong decision taken? Also, he said that the Central Goods and Services Tax Act does not prohibit people from using digital currencies as a medium of exchange. Cryptocurrencies are more like “commodities” rather than a currency at the moment, and that it was beyond the RBI’s jurisdiction to regulate the field.

The documents submitted by RBI were not found to be sufficient for implementing a blanket banking ban. Departments and authorities like the Ministry of Finance, Ministry of Electronics and Information Technology and other major policy departments were neither mentioned nor referred to before this measure was taken. 

Moreover, the counsel from IAMAI pointed out that the documents presented were post-dated and were not even available at the time of taking the measure, this clearly shows that RBI is trying to save its skin now as the matter looks weak in the court and in front of the IAMAI argument.

There must be standards and regulations made for Crypto to operate smoothly in any country. We must look at other developed nations like Germany, the United States, Japan, Israel and other European Union countries that have systematically regulated cryptocurrencies. Cryptocurrencies have enormous potential for bringing in the capital in our country and encouraging a new age of startups which is essential in Industrial Revolution 4.0.

We are on the verge of the Indian budget and we hope that Crypto and blockchain Technology must be encouraged. As per CREBACOs research report released earlier, India has an immediate potential market size of 12.9 billion US dollars and the scope of creating about 25 to 30 thousand jobs immediately once this industry is regulated. Currently, many Indian companies have moved their base abroad due to lack of regulations in India resulting in loss of employment, capital, and talent.

The average volume of Bitcoin and cryptocurrency is observed just before the ban was- 

750 Bitcoins per dayAverage volume across 5 major exchanges in India
10,551 USD Average calculated at the everyday closing price for 180 days
1st November, 2017Starting date
30th April, 2018Ending date
79,13,250‬Per Day Volume Approx
1,42,43,85,000‬180 Day Volume Approx

This outstanding volume is in spite of RBI warnings and nascent investors sentiment in India which is overwhelming when calculated.

We must also not ignore that about 7 percent of traffic to the world’s stock exchanges still goes from Indian IP addresses hence in spite of the blanket ban. This clearly means that Indian users are operating in exchanges outside of the country. 

In short, the RBI ban only hurts crypto businesses to operate Crypto-Fiat transactions but does not stop crypto trading. By doing this, there is a loss on Income tax and direct GST.

 *The updates were derived from Crypto Kanoons twitter news feed. CREBACO does not take any responsibility for its accuracy. 

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