Crypto advocates in India were given a sliver of hope that a crypto ban instituted by the Reserve Bank of India (RBI) and contained in a draft proposal from an inter-ministerial committee dominated by the RBI may be ruled unconstitutional. The RBI had jumped the gun in mid-2018 by prohibiting its banking members from having any dealings with any crypto related companies. Several affected businesses declared bankruptcy, relocated offshore, and/or filed lawsuits, which the Supreme Court delayed in hearing, until the government published its proposed rules regarding cryptocurrencies in India.
A draft proposal was recently released by the committee, which outlined a complete ban on all crypto related activities. Our reporting on the ban noted:
No person shall mine, generate, hold, sell, deal in, issue, transfer, dispose of or use cryptocurrency in the territory of India.
It would also be illegal to use any cryptos in India as “legal tender”, which could carry a jail term of up to ten years, if convicted of this transgression or any of the others contained in the new law. Surprisingly enough, however, the draft did not rule out the possibility of the central bank issuing its own digital currency in the future.
The judge presiding over these hearings was Supreme Court Justice Rohinton Fali Nariman, and from the on-site reporting of Crypto Kanoon (CN), a local media outlet that was in the courtroom, Justice Nariman was not too pleased at the heavy-handed actions taken by the RBI to follow through on its goal to eliminate all things crypto from the Indian landscape. The banter in the courtroom was not what the officials from the RBI expected to hear. Here are a few of the “blow-by-blows”:
- In the primary case, the Internet and Mobile Association of India (IAMAI) argued that the RBI’s circular that forbade banks from servicing private companies was unconstitutional. Per Ashim Sood, counsel for the IAMAI: “RBI cannot step out of its powers as set out in the Banking Regulation Act. Therefore, its action against private businesses in the form of a circular is illegal.”
- During the RBI response, Justice Nariman interrupts the RBI counsel, per the CN reporting: “The judge interrupts and asks how you [RBI] are concerned with consumer protection, it is not your concern. It is [the] government’s concern and not yours.”
- The justice requests documentary evidence and is not happy with the reply: “Various portions of IMC report are being read to prove that the RBI decision is based on well-substantiated research. The judge asks for various reports mentioned in the IMC report, which the government claims as confidential. Consequently, the Judge immediately calls the Solicitor General…”
- The Justice adds: “Now justice Nariman questions RBI why you have not properly responded to the representation. You just said that we are forwarding to Government. Angrily says this is not an answer.”
- Justice allows two weeks for answers to his requests: “Case takes the most unpredictable turn. Justice Nariman directs that RBI must respond to the representation in the manner appropriate. Offers to defer the case for 2 weeks as part heard, let the answer come on reconsideration of banking ban by RBI. RBI has agreed.”
- Justice Nariman concluded: “Exchanges are not asking to uplift the ban but they are only asking to reconsider. If you don’t give answer to it, I will pass the judgment.”
There now is a two-week reprieve in which the RBI must prepare a more convincing argument, backed by actual research, not anecdotal evidence as it presented in court. The Solicitor General has been given one week to “furnish various docs”, referenced by the RBI. Per TheDailyHodl, the “IAMAI claims that the central bank banned crypto on “moral grounds” without presenting research on how cryptocurrencies would impact the economy.” As Cointelegraph has subsequently reported:
An expert estimated the country would lose a market worth around $13 billion if it signed the ban into law.
It remains to be seen if the “research” provided in two weeks will satisfy the needs of Justice Nariman in order to take final actions on the cases before his court, whether positive or negative with respect to the Indian crypto community.