In a landmark decision, the Supreme Court of India has struck down a circular issued by the Reserve Bank of India (RBI) on 5 April 2018, which instructed regulated entities not to deal with or provide services to any individual or business entities dealing with or settling cryptocurrencies.
Without outright banning the use of digital currency, this effectively prevented any business which dealt in digital currencies from operating in India.
The case, Internet and Mobile Association of India v Reserve Bank of India was heard by a three judge bench comprised of Justices Rohinton Nariman, Aniruddha Bose and V Ramasubramanian.
The decision is being celebrated by the industry after the RBI's decision at the time forced several digital curreny exchanges in India to either close, relocate to other jurisdictions or pivot to alternative business models.
In the 180-page(!) judgment, the Supreme Court ordered that the April 2018 circular be set aside “on the ground of proportionality”, saying:
When the consistent stand of RBI is that they have not banned VCs [virtual currencies] ... it is not possible for us to hold that the impugned measure is proportionate.
The judgment also highlights that the RBI issued the original circular despite:
RBI not finding anything wrong about the way in which [digital currency] exchanges function
In a pre-verdict analysis Tanvi Ratna, chief executive and founder of Policy 4.0, cautioned that the verdict could be a "short-term respite" since the judgment against the RBI "does not directly impact actions on the policy level." She went on to say:
if the verdict goes against the actions of the central bank, there might be re-thinking on the issue within our financial policymakers. There is no guarantee this will happen, though, especially if the verdict only address the question of regulatory overreach of the RBI, and leaves sufficient leeway for policymakers to decide upon the treatment of cryptocurrencies
This represents an interesting shift in approach with Courts moving increasingly to recognise the validity of digital assets as property in the UK and Australia, and perhaps India may soon follow suit.