Home>ANALYSIS>Three Days of Hearings Before India’s Supreme Court on Crypto Ban
ANALYSIS

Three Days of Hearings Before India’s Supreme Court on Crypto Ban


The Supreme Court of India has wrapped up the first three days in a hearing on a landmark case brought against the country’s central bank against its ban on banks’ dealings with cryptocurrency-related businesses.

From Jan. 14 through 16, proceedings were focused on arguments presented by Ashim Sood, the legal counsel for the the Internet & Mobile Association of India (IAMAI).

IAMAI is a not-for-profit industry body whose mandate is to appeal to governments on behalf of internet industry consumers, shareholders and investors. Members include Yahoo! India, Apple, eBay, Unocoin and Etsy.

On the heels of both public and industry-led petitions, the IAMAI is levelling a case against RBI’s controversial imposition of a blanket ban on banks’ dealings with crypto businesses back in April 2018, which came into effect in July of that year. 

The ban has taken a heavy toll on the local industry, leading major crypto exchanges such as WazirX to overhaul their business models so as to avoid in-house crypto-fiat conversion; other platforms, like Coindelta, have been forced to terminate their services altogether.

This article draws on the extensive live reporting of Indian crypto regulatory news and analysis platform Crypto Kanoon (CK) via Twitter and private correspondence with CK founders Kashif Raza and Muhammad Danish. Embedded quotations are drawn from CK’s live summary of the court proceedings, and may therefore not be verbatim.

Jan. 14

Sood’s preliminary presentation detailed the effects of RBI’s ban thus far and gave a brief overview on the nature of cryptocurrencies, as well as outlining the potential for distributed ledger technology to enhance data integrity and throughput and efficiency in financial services. 

Already in this first presentation, Sood argued that cryptocurrencies should not be classified as currencies, as they can oscillate between serving as a commodity or store of value and as a medium of exchange. 

On the last day of the hearing, Sood and the Judge would revisit this point, the latter proposing that in its function as a medium of exchange, cryptocurrency falls under the central bank’s regulatory purview, and, moreover, that it has no utility as a commodity. To this Sood responded that no individual is obliged to pay in cryptocurrency (as legal tender). He used the analogy of a casino to illustrate his point:

“Some people would find value in it and some people would exchange it. It is a technology which should be given a free play. Casino chips are useful to the people who are inside the casino […] When I come out of [a] casino, its use ceases to exist but then some people may exchange it and it holds a value for the interested people. So likewise there is no obligation to use VCs [virtual currencies] as medium of exchange.”

Jan. 15

The second day of the hearing kicked off with Sood’s take of the global context and the judgement of other governments, in which he emphasized that the majority do not recognize cryptocurrency as a form of legal tender. 

He then addressed two milestones in the history of cryptocurrency legislation in India: a draft bill that could lead to a blanket prohibition on cryptocurrency use per se, recommended to the Indian government in July 2019, and the RBI banking ban circular from April 2018, which forms the heart of the IAMAI representation.

Tackling the circular, Sood argued that RBI has overstepped its bounds as a regulator, straying into areas that should strictly fall under the regulatory purview of the Securities and Exchange Board of India (SEBI). 

The central bank’s focus on concerns regarding volatility and investment risks are, he argued, the remit of SEBI, not the central bank. 

The central bank has no power to regulate how a commodity is traded, he said, and its reference to consumer interest — mirroring similar statements by SEBI — is “arbitrary.” 

Sood further argued that it is incumbent upon the government and regulators to gather and conduct their own material to analyze in order to support and justify action & intervention. This, he claimed, RBI failed to do before deciding to take action:

“Opinion cannot be formed on imaginary grounds. There must be active application of mind.”

At several points in the hearing, Sood went on to cite evidence that ostensibly points to the fact that SEBI, RBI and the government have relied on third-party analyses of the sector, rather than their own studies. 

Referencing conflicting statements from the RBI on the interaction between cryptocurrency use and payments systems, Sood noted that there have been no findings that indicate that payments systems are adversely impacted by the use of cryptocurrencies. RBI has, moreover, contended that it cannot regulate the cryptocurrency sector as it is not itself a payment system, Sood claimed.

At the close of the second day, the counsel argued that the central bank is not authorized to devise a form of prohibition where there is no law to support it:

“The crux of the judgement is that when [the] Legislature doesn’t find a reason to stop/prohibit any economic activity, then the authority doesn’t have power to devise a new form to prohibit such economic activity. Such prohibition violates my right to freedom of trade.”

Jan. 16

Day three opened with Sood’s argument that prior legal activities may only be restricted by a specific policy. In connection with this, where there are deemed to be risks it is strictly the role of parliament, not an administrative authority like RBI, to identify those risks before deliberating on possible intervention.

He honed in on an apparent contradiction in RBI’s stance, arguing that while no international jurisdiction has concluded that it is impossible to regulate crypto, RBI has decided it is impossible and so has moved to ban it.

Picking up on whether RBI’s actions amount to a restriction or an effective ban, Sood argued that while RBI may contend that it is trying to ring-fence the sector, legislation must be evaluated on the basis of its impact. The infringement of rights can be a direct or indirect effect of a given law, he said.

Moreover, Sood argued, a doctrine of proportionality must be applied to any action, asking the judge to consider whether:

“RBI is clouded with the factors which are outside its domain. Whether it is invoking the risks with which it has no connection with being a sectoral regulator.”

The counsel argued that specific areas of concern such as capital outflows and cross-border transactions should be tackled directly, and that restricting the use of cryptocurrencies, in lieu of regulating them, only loosens the authorities’ grip on tracking them and intervening where desired.

As regards money laundering and terrorism financing, Sood noted that countries globally are availing themselves of cybersecurity requirements, licensing rules, capital requirements and other measures to regulate entities in the crypto sector under existing laws. 

He pointed to the existence of the Financial Action Task Force (FATF) guidelines, which have provided a basis for the actions of other countries worldwide.  

Rather than imposing a ban, cryptocurrencies should, therefore, be regulated like other technologies, which can be alternatively beneficial or risky. When it comes to such concerns — notably anonymity and the facilitation of illicit activities — the burden should not be on the exchanges to regulate on behalf of regulators.

In an argument that drew on many of these contentions, Sood said that where the state’s reluctance to devise regulation does not therefore confer on it the right to simply ban an activity.

A further state clampdown?

As the Court proceeds to hear the rest of the proceedings in the RBI case, the legal and regulatory climate in India remains uncertain. 

As Sood noted in his presentation, in fall 2019 the Indian government opted to delay the introduction of a draft bill on a potential cryptocurrency ban to parliament in the 2019 winter session.

The bill — entitled “Banning of Cryptocurrency & Regulation of Official Digital Currencies” — reportedly intends not only to impose a complete ban on the use of crypto in India but also to establish the foundations for a state-backed “Digital Rupee” issued by the Reserve Bank of India.





  • Bitcoin
  • Ethereum
  • Bitcoin cash
  • Litecoin
  • Cardano
  • Dash
  • Stellar
  • Ethereum classic
  • Lisk
  • Tron
  • Neo
  • Qtum
  • Omisego
  • Binance coin
  • Zcash
Scan to Donate Bitcoin to 1J6PGL1oemFb3hxabLygq4WgWx8cbfji1r

Please help us if you can with some Bitcoin

Scan the QR code or copy the address below into your wallet to send some Bitcoin

Scan to Donate Ethereum to 0xA8E701dd11280a98e8F2e0A14064AC829E32D50F

Please help us if you can with some Ethereum

Scan the QR code or copy the address below into your wallet to send some Ethereum

Scan to Donate Bitcoin cash to qrth4e0g93h3gpxex8ycwuxtsa332tha5qvkmlz0g5

Please help us if you can with some Bitcoin cash

Scan the QR code or copy the address below into your wallet to send some Bitcoin cash

Scan to Donate Litecoin to LTxxjySMDtERJhHYJ99UFW9AamAWTwCAZ4

Please help us if you can with some Litecoin

Scan the QR code or copy the address below into your wallet to send some Litecoin

Scan to Donate Cardano to DdzFFzCqrhsopoZLhbouUwh2NvvWMPeFrXQW9vNNpPKrjKbRGyLRN5joJgCeZ6e1MRHtPHeLffpkNpQs5AdDA8qFCZ4gA9bYtaerNQTk

Please help us if you can with some Cardano

Scan the QR code or copy the address below into your wallet to send some Cardano

Scan to Donate Dash to XmAdEHrwiVZJVkAxe8hK5U6HZB59L5yhmK

Please help us if you can with some Dash

Scan the QR code or copy the address below into your wallet to send some Dash

Scan to Donate Stellar to GD4KROE42HPOMT7BT6M27HHLFCOSIXPYY2V3WSCX5FYEWRJDIJQ4RWFT

Please help us if you can with some Stellar

Scan the QR code or copy the address below into your wallet to send some Stellar

Scan to Donate Ethereum classic to 0x5BF3fCAC8deA20CF21C9D0D9d058E00EEfc431Ae

Please help us if you can with some Ethereum classic

Scan the QR code or copy the address below into your wallet to send some Ethereum classic

Scan to Donate Lisk to 15642042552518336132L

Please help us if you can with some Lisk

Scan the QR code or copy the address below into your wallet to send some Lisk

Scan to Donate Tron to TYnAenRiV6BsTiE6FVyAcDDxZtBKUQTFxN

Please help us if you can with some Tron

Scan the QR code or copy the address below into your wallet to send some Tron

Scan to Donate Neo to ATiXRHVqYqrNktbxJfcDETfnrSUWSG4cPb

Please help us if you can with some Neo

Scan the QR code or copy the address below into your wallet to send some Neo

Scan to Donate Qtum to QUYXxY6kX7TY2HSLwVYMwFaJNZLwvX5uyp

Please help us if you can with some Qtum

Scan the QR code or copy the address below into your wallet to send some Qtum

Scan to Donate Omisego to 0xA8E701dd11280a98e8F2e0A14064AC829E32D50F

Please help us if you can with some Omisego

Scan the QR code or copy the address below into your wallet to send some Omisego

Scan to Donate Binance coin to 0xA8E701dd11280a98e8F2e0A14064AC829E32D50F

Please help us if you can with some Binance coin

Scan the QR code or copy the address below into your wallet to send some Binance coin

Scan to Donate Zcash to t1cBCyKgSSqWaNrkpvQZUSTuxMmAbbAyFpZ

Please help us if you can with some Zcash

Scan the QR code or copy the address below into your wallet to send some Zcash



Source link

Review Overview

Summary