Back in April 2018, the Reserve Bank of India (RBI) ordered a stop between lenders and cryptocurrency exchanges and traders. They were given three months, until July, to come to code or risk issues with the law. During these three months, everything in the crypto world suffered devastating losses.
RBI’s issues with cryptocurrencies can be traced back to December 2013. From 2016 to 2018, it has issued at least four warnings against Bitcoin and other cryptocurrencies. The warnings of RBI are backed up by other agencies such as the Finance Ministry, the Tax Income Department, the Enforcement Directorate, and market regulator Securities and Exchange Board of India (SEBI). They believe that cryptocurrencies are not legal tender.
Within a few days after the announcement of the ban, the cryptocurrency community in India moved to confront RBI. They are determined to fight it out in court with the central bank.They pleaded for an interim relief which was rejected.
In court, the crypto exchanges argued that the bank didn’t research Bitcoin and similar virtual currencies enough before they were banned. They also said that they are open to have the government propose more regulations. They are willing to amplify security by adding more precautionary measures such as insurance coverage and passport details. However, they believe that there is no amount of security that can prevent all types of fraud because fraud and scams are present everywhere money is.
They argued that the ban was infringing the citizens’ rights to carry an occupation, trade, or business which is clearly stated in the country’s constitution. The ban also moves against the prohibition of discrimination and mandation of equal rights for everyone under the law. They countered the argument of the lack of intrinsic values of cryptocurrencies by saying that they actually do have them, but they’re underdeveloped at the starting stage. They have told the court that as cryptocurrency grows and institutions begin to use it more often, its intrinsic values will increase.
RBI clarifies its stance on the legality of cryptocurrencies like Bitcoin by saying that there are no legal systems for cryptocurrencies defined in the constitution. According to both Coinage Act and the RBI Act, the existing structure of the legal world doesn’t class any virtual currency as money, therefore they cannot be used as valid payment options.
RBI said that its primary goal with the ban is to protect the citizens of India against scams and severe price fluctuations. Cryptocurrencies are not known for their stability in the market. RBI pointed out Bitcoin’s loss of almost $200 billions in barely two months in 2017. They also explained how difficult it is to track where the funds are coming from. So, they can be an easy source for money laundering and financing terrorists. Without the basic knowledge of the origin of the funds, the government won’t be able to tax them.
According to The Foreign Exchange Management Act (FEMA), RBI has the authority to investigate and authorise whether an instrument can serve as a valid currency. However, virtual currencies don’t fall under any other categories mentioned by the act like cheques, money orders, or postal orders. Therefore, RBI noted that they cannot be classified as a foreign currency.
The Supreme Court had set final hearings for September 11. In the final hearings, the faith of cryptocurrencies in India will be known. However, they keep getting postponed for the next day. On September 13, it was postponed again until September 18.
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Hermione is a Haitian-born writer who has been living in the USA since 2010. She earned her Bachelor’s degrees in English Literature and Interdisciplinary Studies at Florida International University. She has done both creative and technical writing during her years in the writing industry. She’s currently pursuing a career in the medical field.