Supreme Court of India, in Internet and Mobile Association of India v Reserve Bank of India case, set aside the Reserve Bank of India (RBI) circular on virtual currencies. Cite reasons for this. Also, discuss the advantages and concerns with Crypto currencies
Answer
In a 2018 circular, the RBI had banned banks from dealing with virtual currency exchanges and individual holders. Virtual currency is a type of unregulated digital currency, which is issued and usually controlled by its developers and used and accepted among the members of a specific virtual community. Virtual currencies are also referred to as crypto currencies, an example being Bitcoin
Supreme Court in a judgement uplifted the ban on virtual currencies because of various reasons. They are:
- Constitutional aspects: SC held that the ban did not pass the “proportionality” test. The test of proportionality of any action by the government must pass the test of Article 19(1)(g) of the Constitution, which states that all citizens of the country will have the right to practice any profession or carry on any occupation or trade and business.
- Regulation aspects: The court found that the RBI did not consider the availability of alternatives before issuing the order i.e. achieving the same objective by imposing a less drastic restraint.
- The RBI has not come out with a stand that any of the entities regulated by it have suffered any loss or adverse effect directly or indirectly, on account of VC exchanges.
- The larger public interest sought to be ensured.
Advantages of Using Crypto currencies:
- Easy access: Crypto currency is readily accessible to all its intended users. It is a decentralized system of currency which can be used and accessed globally.
- Eliminates middlemen: They are one-to-one affairs, taking place on a peer-to-peer networking structure that may eliminate middle men.
- Security: Private and secure way of transitions is the key feature of such currencies.
Concerns on Crypto currencies:
- As they are created by non – sovereigns and they are entirely private enterprises so they lack inclusiveness in distribution.
- They are subjected to high fluctuations in exchange value.
- RBI proposed that they have high anonymity and such currencies are used for illegal activities like money laundering and drugs trafficking.
Various stakeholders have welcomed the decision as they hope that it will increase investment and employment opportunities in India. RBI must relook its decision of banning virtual currencies in India and hence may come with new effective regulations for crypto currencies.