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RBI vs. Crypto: Supreme Court of India – January 28, 2020

IAMAI’s public interest litigation to freely allow crypto activity in India has gained much traction amongst the crypto community. Last week, we saw counsel for RBI, Mr Shyam Dewan and counsel for IAMAI, Mr Ashim Sood, present their cases to a panel of three judges.

While Dewan defended RBI’s authority to take whatever action it deems necessary in order to protect the stability of the domestic economy, Sood presented evidence to show that the RBI had conducted no independent research and had no proof that VCs would negatively impact regulated payment systems.

For CNZ’s full coverage of previous arguments, see here.

The hearing is set to resume today with IAMAI counsel, Advocate Sood, continuing his remarks. Stay tuned for our blow-by-blow coverage!

January 28, 2020 - RBI vs. Crypto Updates

2020

12:19 (IST)

And with this, the RBI vs Crypto hearing comes to an end. Counsel for both sides are expected to submit written statements of their verbal arguments on Friday (January 31, 2020). As of yet, the Court has not indicated when a verdict can be expected in the matter.

12:15 (IST)

Advocate Dewan ends his remarks by stating that due to the digital nature of Cryptocurrencies as well as their legal creation, they could only be interpreted as property. He adds that the shutting down of Crypto exchange platforms was an indirect and arbitrary result of RBI’s action.

12:11 (IST)

Dewan begins his remarks by stating that Crypto should be perceived as a property. He argues that while its use may be similar to that of money, from the perspective of its legal creation, Crypto possesses all characteristics of a property. To support his classification of Crypto as a property, the counsel submits into evidence a report by a UK Cryptoasset Taskforce.

12:03 (IST)

Advocate Ashim Sood rests as Counsel representing a four exchanges, Advocate Nakul Dewan begins his remarks.

11:59 (IST)

Sood addresses a point raised by Justice Ramasubramaniam earlier regarding Warren Buffet’s statement that Bitcoin was a “delusion” and had “no unique value at all”. Sood points out that Buffet has previously admitted that he failed to recognize the potential of tech corporations like Apple and Google. Sood ends his remarks by saying that if Warren Buffet could admit that he made an error in judgement, RBI should have no qualms about doing the same.

11:52 (IST)

Counsel moves towards the end of his remarks by arguing that all new, niche and revolutionary technologies introduced have challenged status quo. However, legislatures and authorities have always reacted to such changes and adapted accordingly

11:46 (IST)

Sood contends that RBI’s defense that their action was nip to the bud only goes to show that they were ill-equipped to deal with something capricious. As he elaborated earlier, a preemptive action can only be based on concrete proof of danger, not mere conjecture or fears in face of new technology.

11:42 (IST)

Furthermore, Counsel Sood points out that Crypto would arguably provide an excellent means for law enforcement agencies to detect and prevent crime. If exchange platforms were directed to maintain transaction data on a blockchain-based ledger and implement stringent KYC protocols, law enforcement would have irrefutable and easily accessible proof of any transactions for illegal purposes.

11:38 (IST)

Sood says that the directive’s true intention is to control consumer behavior. However, it seems to have failed in doing this.

11:35 (IST)

IAMAI Counsel proceeds to read from the RBI circular banning crypto. Sood argues that the directive only serves to make crypto untradable on crypto exchange platforms without actually impacting the ability to traders to make transactions. The directive does not stop the use of VCs as a mode of payment or as a method to transferring funds abroad. Therefore, it does not actually address any of RBI’s concerns regarding the dangers posed by cryptocurrencies (i.e., money laundering and terrorist financing).

11:30 (IST)

Sood adds that in order to sufficiently prove that VCs are detrimental to regulated payment systems and monetary policy as a whole, RBI must present independent and trusted studies that demonstrate the exact ramifications of people adopting crypto as a medium of exchange. In absence of any such research reports, the supposed danger posed by cryptocurrencies cannot be adequately established. Therefore, pre-emptive action is not warranted.

11:20 (IST)

Next, Mr Sood moves to the point of RBI’s statutory powers and its limited authority to take pre-emptive action. Through various case laws presented in Court last week, the counsel for IAMAI argued that even as an expert body responsible for India’s monetary policy and sustaining a stable economy, RBI could only take pre-emptive action against an entire banking channel if it presented an imminent danger. In the case of Crypto, counsel argues that no such danger has been adequately shown.

11:15 (IST)

The Supreme Court session resumed on time with Advocate Sood beginning his arguments where he left off. He reiterates that RBI has failed to provide satisfactory evidence as to the fact that cryptocurrencies have any impact on a central bank’s monetary policy.

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Mahima Duggal

Mahima Duggal has completed her MA in International Security from the University of Warwick (UK) with distinction. She also holds a BSc (2:1 Honours) in International Relations from the London School of Economics and Political Science (LSE). She is a trained journalist who has completed an undergraduate degree in journalism and public relations from the University of Newcastle in Australia. Mahima's research interests involve technology, cyber security, human rights and international development. She follows all things crypto and strongly promotes the use of blockchain technology for social change.

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