by Rajas Salpekar
The Supreme Court on 4th March 2020 ended the moratorium imposed on trade of bitcoins by a circular released by the Reserve Bank of India [RBI] on 6th April 2018. The circular directed all the financial institutions controlled by RBI to stop dealing in crypto-currency and asked them to refrain from undertaking any act which would promote the use of virtual currency in the country, which included not giving loans and seizing accounts of the firms or the people involved in the crypto-currency trade. Further, the circular also gave the banks a period of 3 months to do the ordered adjustments.
Soon after the release of the circular, two writ petitions – Writ Petition (Civil) No.528 of 2018 and Writ Petition (Civil) No.373 of 2018 challenged the validity of this circular. The first petition was filed y a non-profit organization, Internet and Mobile Association of India and the other was filed by a group of companies and individuals who were involved in the virtual money market.
Both the petitions challenged the circular on two grounds broadly, firstly by contending that crypto-currency did not fall within the definition of money or currency as per the RBI Act, 1949 and the Banking Regulations Act and thus were outside the ambit of RBI and secondly by stating that the ban imposed had affected the right to carry trade as was guaranteed under Article 19(g) of the constitution.
The court after making a holistic review of the powers of RBI found that it had the power and duty to frame policies for regualation of the market in people’s interest andthus were well within their powers to have rule on bitcoin and thus set aside the first issue raised by petitioner. However, the Apex Court held that a blanket ban was a very radical move and the RBI had not take cognizance of any alternatives and thus upheld the second contention.
Therefore, the judgment given in Internet and Mobile Association of India vs RBI opened the route of trade of Bitcoins in India by setting aside the RBI’s circular