In early 2018, India’s central bank, the Reserve Bank of India (RBI) announced that it had placed a ban on the sale or purchase of cryptocurrency for entities regulated by RBI terming cryptocurrency as non-sovereign. Back in July, Indian cryptocurrency watch panel proposed fines and jail time for cryptocurrency use with up to ten years in prison for general crypto use in the country

Soon after, a Draft bill dubbed “Banning of Cryptocurrency & Regulation of official digital Currencies” was issued by the Ministry of Finance. The report followed countless petitions that were filed by crypto enthusiasts.

Last week the Supreme Court decided to continue assessing what it’s calling the ‘Crypto Matter.’ The case was the result of multiple petitions by the Internet & Mobile Association of India (IAMAI), a not-for-profit industry body that appeals to the government on behalf of internet industry consumers, shareholders and investors.

The case was first filed in August 2019 and stated that RBI’s decision to issue its controversial prohibition order was not justified. The RBI’s legal counsel pointed out that it has the authority to operate the nation’s economy and the ban was placed to ensure monetary stability and to avoid “reputational risks” for regulated entities that were involved.

The Case now

Now, the petition is being heard again in the Supreme Court and the case was started off by Ashim Sood, the counsel representing the IMAI, by reviewing arguments that were discussed earlier in August. He explained the basics of cryptocurrency and blockchain technology to the judges and explained how various nations have been successful in regulating local crypto markets.

He further focused on the need for proper regulations to enable investors and crypto enthusiasts to access digital currencies in a safe and transparent manner.

In its defense, the RBI presented pointed towards incidents like the Binance KYC breach as an example of why the crypto industry poses a massive cybersecurity threat to the economy of any nation where it is allowed to foster and grow.

Sood, however, told the judges that such cyber-attacks were the reason why positive regulatory measures were needed in India so that the sector as a whole could be better equipped to face such challenges.

In regards to this matter, Sumit Gupta, CEO of DCX, an Indian cryptocurrency exchange, said in a statement to media outlet Cointelegraph that despite the industry being self-regulated in “cannot enforce them beyond a point.” He emphasized on the need for positive regulations and how it can help curb the various “negatives” of the crypto industry.

Open-mindedness of the court

The judges presiding over the case have had a somewhat positive stance towards crypto as they have been eager to learn about the various economic possibilities that the technology represents. The panel requested the legal counsel for the IAMAI to explain how cryptocurrencies were being regulated in countries like Australia, Italy, Malta and Japan, and whether or not it has helped curb incidents of money laundering or tax evasion.

Sood cited the example of Mt. Gox, and how its collapse led to the creation of an efficient regulatory framework by the Japanese government while demonstrating to the judges how different nations are handling crypto-related matters within their respective jurisdictions.

The court did mention various suspicious services like Silk Road and the dark web and how cryptocurrencies have been exploited in these sectors. However, the judges did concede that crypto, like any other technology, was not bad and could be used for illicit activities when in the hands of the wrong people.

The judges also thrashed RBI over its decision of restricting crypto activities in India. The RBI had stated that the lack of clear regulations was the reason for the ban they placed. The Judges stated that it was the responsibility of the RBI to devise a regulatory framework for cryptocurrencies.

When the RBI stated that digital currencies were only being used by people who wanted to hide their identities, Sood told the judges that this information was inaccurate as many people cryptocurrencies as an alternative investment option to conventional stocks and bonds.

A sign of hope

So far the RBI vs Crypto case is looking good for the IMAI as Gupta believes that their case is strong and the judges are bound to see the positives of digital currencies. He said:

“We are of the firm belief that the judges will see reason in our arguments and provide a judgment, which is fair and favorable.”

The RBI is set to submit all of its remaining statements regarding its concerns about cryptocurrencies on January 21.

Even though cryptocurrencies are still considered a rouge investment/asset class in India, the nation has the exact opposite stance towards Blockchain technology. However, now there is high hope that a positive decision from the supreme court would compel the RBI to regulate cryptocurrencies, thus largely benefitting the industry that is trying to grow.

