Internet And Mobile Association of India vs. RBI
Internet And Mobile Association of India vs. RBI
In Internet And Mobile Association of India vs. RBI, the RBI’s worries that VCs were vulnerable to hacking, additionally there may be speculation because there was no underlying asset and the resulting volatility might result in huge losses. VCs might facilitate money laundering and terrorism funding were the basis for the Circular. Oddly, since 2013, the RBI has only released warning press notes outlining the same concerns before publishing the Circular.
The RBI did not mention any risks when the Circular was released. Later, in April 2018 (the “order”), the Reserve Bank of India (RBI) imposed its prohibition on banks conducting business with cryptocurrency enterprises, which became effective in July of that same year.
The Internet and Mobile Association of India (IAMAI) then appealed the RBI announcement to the Supreme Court of India. Relevantly, VC usage and trade were legal in India when the Circular was published, and as a result of the RBI’s prohibition, VCs remained out of the official economy.
Internet And Mobile Association of India vs. RBI
- Does the RBI have the authority to impose trade restrictions on virtual currencies?
- Is it essential to give instructions based on the notion that a statute's context should determine how the phrase "public interest" is used in a particular provision?
- Can the decision to forbid the sale of an item under Res Extra Commercium be made by law rather than by an executive body?
Internet And Mobile Association of India vs. RBI
CONTENTIONS BY PETITIONER
- The primary goal of trading virtual currencies (VCs) was to deepen the ties between the virtual currency market and the formal Indian economy. The immediate effect of the contested Circular is to do this without outright forbidding it. This would ultimately encourage cash and black market transactions.
- VCs don't meet the requirements to be eligible for funding. If anything is to be considered money, it must satisfy four requirements. Additionally, the RBI is in charge of regulating since it lacks the authority to do so.
- Courts see VCs as money, commodities, or intangible properties in various jurisdictions, e.g., the USA and Singapore. It is because, historically, money understood in the social sense and money understood in the legal sense is different.
- Only legislative action can designate an object as Res Extra Commercium; an executive authority lacks the power for such decisions.
CONTENTIONS BY RESPONDENT
- Virtual currency is not accepted as money since it does not function as a unit of account, a means of trade, or a store of value.
- Virtual money can be applied or used in illicit actions.
- The RBI is within its rights to issue the disputed judgment and is not outside its authority. It is done under the RBI's control by the 1934 Reserve Bank of India Act and the 2007 Payment and Settlement System Act.
- No one has the right to conduct business on the network of companies under RBI regulation.
Key Pointers Highlighting The Case
ANALYSIS
- The Supreme Court's decision provides relief for the virtual currency and cryptocurrency industries, which were adversely affected by the RBI's ban on its regulated businesses.
- The SC has not decided on the legitimacy of virtual currencies or the cryptocurrency business, which is still not governed by Indian Law.
- The government panel recently presented a draught law, "Banning of Cryptocurrency and Regulation of Digital Currency Bill, 2019." However, the venture capital business still confronts obstacles.
JUDGEMENT
{Internet And Mobile Association of India vs. RBI}
- The Supreme Court ruled that the RBI has the authority to control or forbid any conduct of this sort.
- RBI Circular designates "system participants" per the Payment and Settlement System Act, with banks as primary recipients.
- SC requires FR limitations to adhere to the reasonableness standard for Article 19(1) of the Indian Constitution.
- The SC said the RBI circular lacks reasonableness and proportionality since the RBI found no adverse effects of VC exchanges on regulated businesses in the last five years or more. The RBI also stated that it has not outlawed venture capital in the country..
- The RBI Circular could thus be declared illegal for lack of proportionality.
Currently under review, this measure will undoubtedly strengthen the government’s position on the legitimacy of virtual currency firms and cryptocurrencies in India if it passes.