In what seems a bizarre scenario, the onus of the future of the cryptocurrency literally now lies in the hands of Supreme court on India. The apex court has clubbed multiple petitions into a single case that is now to be heard on July 20. While one petition has sought the RBI and Union of India to clarify its stance on Cryptocurrency, the other one has outrightly demanded a ban. In the midst of it all lies several petitions from individuals and exchanges to allow the trading of cryptocurrencies which will soon end as per the decree announced by the RBI.
Petition to Ban Cryptocurrency
In October, 2017 Siddharth Dalmia and Vijay Pal Dalmia filed a writ petition against Union of India, the Reserve Bank of India, ministry of Finance and the ministry of Home affairs. The petition 1071/2017 sought for a complete ban on cryptocurrencies in India deeming them illegal. The reason – They are being used to fund illegal activities including money laundering and funding terrorism.
The case is now tagged along with other petitions and will be heard in court on July 20.
Petition to Clarify Government’s stance on Cryptocurrency
Two brothers Dwaipayan Bhowmick and Manab Kumar Bhowmick filed the now famous 43 page petition against 7 government bodies including the union of India and Reserve Bank of India “seeking issuance of directions of appropriate nature so as to regulate the flow of Bitcoin (crypto money) and to ensure that the same be made accountable to exchequer.” In other words, a clarification of the state of Crypto in India.
The petition 1076/2017 was listed on registrar court for the longest time as several of the respondents failed to register. Petitions from both Dalmia and Bhowmick were tagged together for first hearing on May 02 which is now to be heard on July 20.
Petition for Interim Relief – A stay on RBI’s Banking Ban
While the above two petitions left the cryptoverse unaffected, the RBI’s decision to restrict banks from providing services to crypto businesses triggered multiple entities to seek the help of the apex court. Four exchanges, two individuals filed a writ petition in Supreme court to get an interim relief from RBI’s banking ban. The interim relief would allow the exchanges to operate and the banks to provide services to everyone until a total stance on cryptocurrencies is taken in India.
The petition 373/2018 was tagged along with Bhowmick and Dalmia’s case and was to be heard on May 11. On that day court rejected interim injunction and moved the case for hearing to May 17.
India’s Mobile Association joins the fight
On May 16, the Internet and Mobile association of India (IAMAI) moved to Supreme court to with a stay application on RBI’s circular. Indian cryptocurrency exchanges like Koinex, Zebpay, Unocoin, Coindelta, coinsecure, throughbit and pocketbits are part of the BACC which in turn is a sub-group of IAMAI.
The petition has been assigned a date of hearing of July 6, if granted, the RBI’s ban on banking will be lifted until a decision is taken on Cryptocurrencies’ legality in the country. Coincidentally July 6 is also when the three-month deadline the RBI has given to bank ends.
All High Court cases against RBI to move to Supreme Court
In the order passed on May 17, the Supreme court has permitted the RBI to move all cases pending in High courts to Supreme court. There are currently two pending cases in Delhi High Court and one in Kolkata High court. It includes another popular case – Coinrecoil exchange Vs the RBI in Delhi High court. Another one in Delhi High court was filed by Moneytradecoin.com.
CoinRecoil’s case was to be heard in HC on May 24, which is now stayed and will be heard along with other cases in Supreme court on July 20.
No More cases against RBI in High Courts
Within the same order, the Supreme court says,
“It is further directed that no High Court shall entertain any petition relating to the circular No.DBR.No.BP.BC.104/08.13.102/201718 dated 06.04.2018 issued by the Reserve Bank of India on “Prohibition on dealing in Virtual Currencies”.
Seeking the help of Attorney General
The court has asked the Union of India to “apprise” the attorney general of India to assist the court in the matter. The current Attorney General is Mr. K. K. Venugopal. Venugopal has served as a constitutional lawyer and senior advocate in the Supreme court of India and was appointed as the AG on June 30, 2017.
K.K. Venugopal has been awarded Padma Vibhushan and Padma Bhushan awards and has served in the Royal Government of Bhutan as a constitutional adviser for drafting the constitution of Bhutan. Mr. Venugopal has been in news recently for his remark on Aadhaar’s security when he reportedly said that the Aadhaar data remains secure behind a complex that has It’s 13-ft high and five feet thick walls.
The July 20 Hearing
Within the next six weeks RBI will proceed to move all cases against it in the lower courts to Supreme court. After which the hearing that is currently set for July 20 shall commence. It will be interesting to see how multiple petitioners will present their arguments for and against cryptocurrencies in India. Along with it, lawyers will argue about whether or not the citizens should be allowed to trade in cryptocurrencies.
This is definitely a defying movement that will go down in history as the maker or breaker of the future of cryptocurrencies in India.
RBI Deadline closer than the case hearing
The circular in question released on April 6 states that all banks should unwind their business ties with cryptocurrency exchanges in India. The deadline comes to an end early July.
Will the exchanges be able to operate as the case goes into hearing on July 20?
In theory NO. All banks will end ties and hence exchanges will not be able to operate in India. Unless the above petition filed by the IAMAI gets the stay order on RBI’s ban before the deadline.
Most exchanges and blockchain projects are already exploring the options to move oversees. According to some sources, exchanges like Zebpay have already begun down-sizing in India.
Cryptocurrency cannot be declared illegal by the RBI
In a response to Bhowmick and Dalmia’s case, the RBI stated
“In the instant case, the issue of legalising virtual currencies (VCs) like bitcoins or otherwise will have implications on the roles and responsibilities of other regulatory/ enforcement agencies. Therefore, the RBI cannot unilaterally decide for the government on the legality of bitcoins,”
– as reported by The Hindu Business Line
Going by the assumption that cryptocurrency remains legal while not declared illegal, traders will have multiple options to buy and sell cryptocurrencies even if the exchanges shut shop. It won’t be a surprise if over the counter trade in cryptocurrencies using cash or bank transfers proliferate.
Sadly, these transactions will not be tracked as efficiently as the ones that can be tracked on exchanges that capture PAN and Aadhaar data for KYC and Anti AML policies.
It must be noted that the Government of India has setup a committee to report on regulations of virtual currencies under Subhash Chandra Garg, Economic Affairs Secretary.
What do you think the Supreme court should do? Let us know in the comments below
Cover Image source: Flickr/namecoin