My Lord, Satoshi Nakamoto?
“He still remains anonymous.”
Reserve Bank of India, on 06.04.2018, in exercise of the powers conferred by Section 35A read with Section 36(1)(a) and Section 56 of The Banking Regulation Act, 1949 and Section 45JA and 45L of The Reserve Bank of India Act, 1934 and Section 10(2) read with Section 18 of The Payment and Settlement Systems Act, 2007, directed the entities regulated by RBI (i) not to deal in virtual currencies nor to provide services for facilitating any person or entity in dealing with or settling virtual currencies and (ii) to exit the relationship with such persons or entities, if they were already providing such services to them.
The archeological excavations carried out at the (world wide web) sites, reveal that this digital currency civilization is just 12 years old (at the most, 37 years). These excavations became necessary since virtual currencies, known by different names such as crypto-assets, crypto-currencies, digital assets, electronic currency, digital currency etc., elude an exact and precise definition, making it impossible to identify them as belonging either to the category of legal tender solely or to the category of commodity/good or stock solely.
It is beyond any pale of doubt that irrespective of the metamorphosis (or gene mutation) it has undergone over the years, Bitcoin was developed as an alternative to fiat currency. The exact identity of virtual currencies eludes precision. Some call it an exchange of value, some call it a stock and some call it a good/commodity. There may be no difficulty in accepting the divergence of views, if those views are not driven by fear of regulation. But if someone presents it as currency to a regulator of stock market and presents it as a commodity to a regulator of money market and so on and so forth, the definition will not merely elude a proper molecular structure but also elude regulation. This is where the problem of law lies.
It is true that though, at its birth, it was conceived of only as an alternative to money, crypto-currencies assumed different shapes, different shades and different utility values over the past decade and more. Several international monetary agencies/watchdogs are dabbling to find out what these are and they are also divided in their opinion.
While we have recognized the power of RBI to take a pre-emptive action, we are testing the proportionality of such measure, for the determination of which RBI needs to show at least some semblance of any damage suffered by its regulated entities. But there is none. When the consistent stand of RBI is that they have not banned virtual currencies and when the Government of India is unable to take a call, it is not possible for us to hold that the impugned measure is proportionate.
The concern of RBI is and it ought to be, about the entities regulated by it. Till date, RBI has not come out with a stand that any of the entities regulated by it has suffered any loss or adverse effect directly or indirectly, on account of the interface that the virtual currency exchanges had with any of them. There must have been at least some empirical data about the degree of harm suffered by the regulated entities (after establishing that they were harmed). It is not the case of RBI that any of the entities regulated by it has suffered on account of the provision of banking services to the online platforms running virtual currency exchanges. The impugned measure, is liable to be set aside on the ground of proportionality.
– Hon’ble Justice V. Ramasubramanian, Internet and Mobile Association of India v. Reserve Bank of India, [Writ Petition (Civil) No. 528 of 2018].