The Cryptocurrency vs RBI case resumed the hearing today i.e on 20/8/2019 in Supreme Court, Court No. 5.
According to a series of tweets by Crypto Kanoon, the counsel for IAMAI, Ashim Sood, started the session by explaining examples of various countries and states and how they went about regulating cryptocurrency.
He also explained the law formulated by Wyoming (USA) to regulate Crypto assets and custodial services (Exchanges). Apart from the United States of America, he also pointed out regulations in the European Union were taken into consideration.
Documents of G20 meeting 2019 is being read. It said, most of the countries in g20 nations are inclined to regulate Crypto and are not treating industry players as a bunch of criminals.”
Sood said, “Yes there are dangers associated with cryptocurrencies. We have countries like UK, US, who are regulating cryptocurrencies after understanding the technology. The UK realized that you can’t prevent anybody to manage their affairs dealing with Crypto. And on the other, we have China and Indonesia. While it might not matter which side India falls, there is no point in banning something just because it has dangers”
Referring to the circular, Sood said, “RBI purportedly took action in consumer protection, anti-money laundering, terrorist financing etc. However, in one of its post circular, RBI realized that it pushed the transparent exchanges to dark port, people are resorting to peer to peer using cash.”
He further added, “India has Consumer protection laws in existence which can be specifically made applicable to Crypto and special provisions can be formulated to deal with peculiar situations. Also, Anti Money laundering law of India is a comprehensive law which provides for disclosures, maintenance of records etc. It can be made applicable on Crypto as well.”
Sood believes that RBI circular is void on the ground of vagueness. It gives no definition of Crypto and seeks to crack down on all indiscriminately.
Later, a judgement was being read which holds that vagueness of rule is detrimental to its validity. With this Sood concluded his arguments.
Further, senior advocate Nakul Dewan, started his arguments on the interaction between Virtual currencies and Fiat currency on behalf of cryptocurrency exchanges in India. He has briefed the court on how the use of money evolved in the worlds from barter to gold to fiat.
He also pointed out when the United States of America objected to India and Iran’s deal of fuel, India took the recourse of fuel in exchange of fuel which would be classified as ‘peer-to-peer’ transaction.
The senior advocate listed the central bank’s concerns and the counter-arguments namely:
1. No authorization to Crypto business (No law prescribes authorization),
2. Hacking (So is with the Digital banking)
3. consumer protection issues (Consumer protection laws can deal with it)
4. No inherent value (Even fiat is not backed by anything as a matter of fact)
5. Volatility (Stocks also have that)
6. use in Illicit activities (Laws like KYC AML etc. can be made applicable
Dewan also explained the different types of Cryptocurrencies and Utility token with an example of shopping points and Airlines miles. He also explained the advantages of blockchain technology in the banking and financial sectors.
Further, the Inter-Ministerial Committee’s report was being readout.
The judge said that the report seems to guide only on the aspect of how the technology can be used by Intra/ interbank transfers. And not Crypto. However, Dewan pointed out it also made provisions for official digital currency.
The session was resumed after lunch. The Judge claimed “ If Crypto is not socially prevalent currency, then certainly it is not money. it is just a medium of exchange for consenting individuals.”
Dewan replied: “Now if Crypto is not money. Then it should be considered as a monetary asset which people may choose to convert to fiat currency. People must have the right to use it in barter.”
The judge said that: Crypto is not money but it is intangible property. If crypto had an impact on monetary stability of the country, Govt. could have proceeded but in their November 2017 they have accepted by it has little popularity among the general public.
Further, the counsel has submitted a detailed chart across the board which mentions all notifications of RBI. Representation was made to RBI by industry players in pursuance of this Hon’ble Court’s order.
It is worth noting that there was no change of circumstance from 2013 to 2019. Then what made the RBI change its stance on crypto. change of stance is unsubstantiated. However, RBI did not respond to that except saying that we have forwarded the representation to the IMC.
The Counsel informs the court that exchanges had even offered to provide a dashboard to all the relevant authorities citing real-time data so that they can understand the technology and business.
counsel argues that investors know about the volatility in Crypto prices and they choose to invest in that. They must be allowed to do that in their right.
The judge replied positively that what you are saying is when you can make a regulatory framework to regulate it then why to ban. Similar to the regulatory framework for stocks which is not banned.
Further, in the course of arguments, Counsel referred Singapore Parliament to in which deputy PM of Singapore had responded to certain questions. The counsel further adds “Singapore is a developed economy which has taken into consideration all pros and cons and applying measures to regulate it instead of banning.” Counsel conclusively says that there is no prohibition on Crypto except RBI banking ban.
Counsel ends his argument by arguing one application for release of money of exchanges lying in bank and banks frozen that even within the 3 months exit period.
Meanwhile, Mr. Shyam Diwan, Ld. Sr. Advocate started his arguments in favor of RBI.
Shyam says that: “Crypto is a privately issued digital means of payments. It has a direct impact on monetary and payment system. And RBI has issued notifications to discourage this but when it did not work, RBI took this action”.
He further added “Crypto has some monetary characteristics and its value is driven by people’s consensus. If more and more people continue to adopt them as means of payment then it might compromise our monetary system badly. It also has the ability to cross border transactions. That is where the problem lies.”
Later, the Counsel reads out a list of events which transpired over a period of time including actions taken by RBI and policy evolvement by Ministry of Finance.
Counsel says that the first committee appointed by the Govt i.e., Interdisciplinary Committee has studied the subject and applied its mind.
According to the Budget speech of Mr. Jaitley, Cryptos must not be a part of the payment system.
Shyam concludes the hearing explaining various incidents of hacking of exchanges worldwide including the infamous hack of Coinsecure exchange. He also claims that Bitcoin and Crypto is a Ponzi scheme, price bubble, and huge environmental disaster – for example, consumption of electricity in mining is even more than the total electricity consumed in Switzerland per year.
The Hearing ends here. The session will resume tomorrow by RBI and the same will be followed by Rejoinder by the Petitioners.