After hearing the arguments against the banking restriction by the Reserve Bank of India (RBI) in detail, the Indian supreme court directed the central bank to reply to the representations filed by crypto exchanges. Since the RBI has not adequately answered them, the court set a new date to resume hearing the case.
Also read: Central Banks Worldwide Testing Their Own Digital Currencies
The Crypto Hearing Resumes
The Supreme Court of India resumed hearing the case against the crypto banking ban by the central bank Wednesday after spending all day on it the previous day. Senior Advocate Shyam Divan, counsel for the central bank, continued to defend the RBI’s power to issue a banking ban. He started off by reading the disadvantages of cryptocurrency from the interministerial committee (IMC) report, Indian news platform Crypto Kanoon reported from the courtroom, elaborating:
The judge interrupts and asks how you [RBI] are concerned with consumer protection, it is not your concern. It is [the] government’s concern and not yours.
Divan explained to the court why a ban is appropriate, then discussed the IMC recommendations and various crypto warnings issued by the central bank. He reiterated the point he made yesterday that the ability for cryptocurrency to be used for cross-border payments could undermine the country’s monetary policy. The RBI counsel proceeded to discuss the use of cryptocurrency in illicit activities, noting its “anonymity.” He cited a July 2018 report by the Financial Action Task Force (FATF) and the May 2018 European Union directive.
India’s Payment and Settlement Systems Act 2007, the RBI Act and the Banking Regulation Act were examined. The counsel explained that the former gives the RBI power to issue policies to manage or operate its payment system, and regulate entities deemed a threat to it. The counsel additionally pointed out that provisions in the latter two acts empower the RBI to issue a banking ban.
The hearing resumed after a lunch break. Several past judgments were read out in favor of the RBI. After Divan concluded his arguments, the judge “asked the petitioners that RBI is an expert body which has taken decision on the basis of a study, who are we to interfere in their policy? The question is not whether it is arbitrary or not, but whether they can legislate or not when they are ‘satisfied’ under 35A” of Banking Regulation Act, Crypto Kanoon conveyed.
Next, Advocate Ashim Sood returned to present further arguments against the RBI ban. He asserted that the central bank cannot take action based on the study conducted by others, adding that its claim that cryptocurrencies are Ponzi schemes cannot be substantiated with data.
During the hearing, Justice Rohinton Fali Nariman directed the counsel to the representation filed with the RBI by crypto exchanges, which explains that there is no need for a ban. Sood read out some suggestions given to the central bank by exchanges such as making the Money Laundering Act applicable to them as intermediaries with appropriate requirements. The judge proceeded to question why the central bank has not properly responded to the representation. “You just said that we are forwarding to [the] government,” Crypto Kanoon quoted him as saying, noting that he “Angrily says this is not an answer.” The judge further expressed, “Exchanges are not asking to uplift the ban but they are only asking you to reconsider. If you don’t give [an] answer to it, I will pass the judgment.”
Justice Nariman has deferred the case for two weeks for the RBI to respond in an appropriate manner, which the central bank has agreed to, according to Crypto Kanoon. The court is set to “rehear the arguments on 25th September, on the reply/ reconsideration to be given by RBI to the exchanges’ representations,” the news platform described, adding that the court order states:
After hearing arguments we are of the view that detailed representations by exchanges … have not been answered point by point, therefore RBI to reply [to] them within 2 weeks.
Past Three Hearings & Crypto Regulation
Before Wednesday’s hearing, the Indian supreme court partially heard the crypto case on Aug. 8, Aug. 14, and Aug. 20. On Aug. 8, the court began addressing crypto-related writ petitions, some of which challenge the banking restriction by the central bank, while others concern the country’s crypto regulation. The Indian government asked the court to postpone hearing the latter petitions since it may introduce a bill on cryptocurrency in the next session of parliament. These petitions are now scheduled to be heard in the last week of January 2020. The court, however, began hearing the arguments against the RBI ban in detail.
The counsel for the Internet and Mobile Association of India (IAMAI) was the first to present his arguments to invalidate the RBI circular, issued in April last year to ban banks from providing services to crypto businesses. He challenged the power of the central bank over crypto at length. After the IAMAI counsel concluded his arguments, the counsel for exchanges began making his case against the RBI ban. When he was done, the counsel for the central bank started defending the RBI’s power to issue the crypto banking ban. The hearing lasted all day on Aug. 20.
There is currently no specific regulation for cryptocurrency in India. However, the government has been working on the country’s crypto policies since 2017. The aforementioned IMC was constituted on Nov. 2, 2017, to study all aspects of cryptocurrencies and provide recommendations. The committee’s report was submitted to the government in February and made public on July 22. Within the report is a draft bill to ban cryptocurrencies, which is being examined by relevant regulators, according to the finance ministry.
Do you think the RBI will change its mind and lift the banking ban? Let us know in the comments section below.
Images courtesy of Shutterstock.
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