RBI, case of bitcoin exchanges in the final phase of the Indian Supreme Court – Quartz India


Uncertainty could finally end up in the Indian cryptocurrency ecosystem.

Today (11 September), the Supreme Court will begin the final hearings in the case between the virtual exchanges and the Reserve Bank of India (RBI). At the end of the arguments, it will be known if the exchanges will have a respite from the bank regulator's crackdown.

In April, the RBI had directed lenders to reduce all business dealings with cryptocurrency trade and economic operators within three months.

After the July 6 deadline and the once booming industry has suffered badly since then. For example, Unocoin, a Bangalore-based cryptocurrency exchange, saw the monthly average of transactions on its website decrease from a peak of over 200,000 traders to just 20,000 in the months following the crackdown.

It is not surprising that the exchanges dragged the central bank to court. Their request for a provisional provision had not been granted

In addition to the RBI, the Narendra Modi government, the Securities and Exchange market regulator (SEBI), the direction of application and the tax department on income, the case filed by the exchanges is a party.

Here is a look at the various arguments made so far:

RBI Rationale

In May, the Supreme Court asked the exchanges to engage with the central bank directly while the courts had been on vacation for over a month. In July, at the behest of the court, the RBI explained why he was uncomfortable with virtual currencies.

It primarily aims to protect naive investors who may be exposed to fraud or serious price fluctuations.

It mainly wants to protect gullible investors who may be exposed to scams or serious price fluctuations. As when the bitcoin lost nearly $ 200 billion in market capitalization in just two months after peaking in December 2017, the RBI indicated in its annual report published last month.

Because these transactions are anonymous, keeping a card on the funds channeled into them too can be a task. In addition to money laundering and terror financing, it can also lead to tax problems. The increase in cryptocurrency frauds on a global level is an emblematic case.

These digital currencies have no intrinsic value, says the RBI, as they are not supported by resources, and this is another problem. Instead, the central bank is ruminating its own cryptocurrency to address this problem.

Even the government was uncomfortable with cryptocurrencies and compared them with ponzi schemes. It has also issued warnings warning people to invest in these digital currencies. Meanwhile, in December 2017 he formed a panel that is studying virtual currencies and ways to regulate them. The committee is headed by Subhash Chandra Garg, secretary in the department of economic affairs, and includes members of the RBI and the SEBI.

Arguments of Bitcoin exchanges

Trading in virtual currencies challenged the RBI diktat mainly for two reasons.

These are the article 19 (1) (g) of the Indian constitution allowing citizens to enjoy the right to exercise any profession, trade or business, and article 14 which prohibits discrimination and confers equal protection under the law for all.

The industry claims that it has largely followed the know-your-customer and anti-money laundering guidelines that help authorities track the money trail. Now, however, due to the crackdown, much of the trade has shifted to cash transactions, which could increase illegal activities, a result also recently recognized by the RBI.

The exchanges have also consistently stated that they are open to more control and regulation.

The exchanges have also consistently stated that they are open to more control and regulation. In their correspondence with the RBI, industry players agreed to include more information and precautionary measures such as passport details and insurance coverage.

As regards fraud, exchanges argue that these could happen wherever money is involved, and therefore can not be the reasons for a ban.

The industry also countered the argument of the RBI on the lack of intrinsic value, stating that such value already exists and is destined to develop over time. "For example, to run certain computer programs, you can pay using ether, and as the market matures and more people and institutions start using it, there may be more cases that can increase its value. intrinsic ", he told Quartz the CEO of a cryptocurrency exchange.

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