Can the Reserve Bank of India ban the use of cryptocurrencies? Central bank and cryptocurrencies in legal standoff
The Reserve Bank of India (RBI) is set to regulate or even ban local cryptocurrency exchanges. In response, the Internet and Mobile Association of India (IAMAI) has appealed, stating that the RBI does not have the authority to impose a ban. This has opened the first Bitcoin-related case in the Supreme Court.
Table of Contents
Any exercise of power by the Reserve Bank of India (RBI) must comply with legislative statutes. Otherwise, tomorrow the RBI can say we can't eat cheeseburgers, so there must be specific authorizations in place; otherwise, the whole system would be absurd.
Internet and Mobile Association of India's legal counsel argued in the Supreme Court.
His purpose was to appeal against the RBI's plan to prohibit commercial banks from dealing with cryptocurrencies,
"Why can't you use foreign banks?" asked the judge, who holds the highest position in the Indian legal community.
The lawyer explained that obtaining approvals during transactions would increase the Foreign Exchange Management Act (FEMA) regulatory costs. After some conceptual back and forth, the lawyer brought the issue back to whether the RBI has the authority to ban cheeseburgers.
The "Banking Regulation Act" stipulates that the RBI's exercise of power is applicable to the internal workings of banks and the interests of depositors, especially depositors, rather than other businesses. Clearly, the actions taken by the RBI for the benefit of general consumers exceed their scope of authority.
In response, the RBI acknowledged that it does not have jurisdiction to discuss the legality of cryptocurrencies because they are not coins or currencies, and neither the RBI Act nor the Payment and Settlement Systems Act apply to cryptocurrencies.
The RBI is acting on a legal fallacy by requiring exchanges to show they have the "right" to use cryptocurrencies for exchanging goods and services. However, the law mandates that "prohibition" or "regulation" of certain things must be a legislative act and cannot be exercised through authorization, hence these actions should come from the legislature, not the RBI.
These comments clearly show the lawyer's strong position, but the judge pointed out that some government authorizations allow the RBI to formulate policies. However, there was no conclusion reached on the interpretation of this authorization, and the appeal was postponed. Fortunately, it has been able to enter the court for discussion rather than being shut out.
What is Bitcoin? Why do we need to use it?
Last week, the judge requested a chart showing the legislative approaches taken by other jurisdictions. Therefore, this week, the lawyer went through all major jurisdictions, including New York's Bitlicense, London's commodities or currencies, utility cryptocurrencies, and security cryptocurrencies, further mentioning and explaining other G20 countries.
"No country believes cryptocurrencies are harmful, no country believes they should not be regulated, and no country believes they should be banned," said the lawyer.
Next, the judge asked whether the appellants are only concerned about Bitcoin or all cryptocurrencies. "We want to understand cryptocurrencies and hope to be provided with all information in writing," the lawyer explained what blockchain is and how it is tamper-proof, and he also said:
Cryptocurrencies are electronic currencies that maintain their integrity by rewarding individuals for serving the blockchain system.
They don't allow photography in court, so we don't know if the judge was impressed. Overall, everything seems to be in order, but on the other hand, the RBI stated that they will present their arguments next week on August 20.
Meanwhile, cryptocurrency transactions remain closed, and with the first Bitcoin-related case appearing in the Supreme Court, we can continue to follow what responses the proponents, opponents, and governments will make, even changes in their attitudes.
Related Reads
- Egyptian Central Bank considering issuing cryptocurrency
- India's major trade organization Nasscom opposes cryptocurrency ban
Join now to get the most comprehensive information on financial technology, blockchain insights, and industry examples!