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DOUBLE-EDGED SWORD: ON SUPREME COURT’S CRYPTOCURRENCY RULING

Why in news?

The Supreme Court has struck down a 2018 circular by the Reserve Bank of India (RBI) that directed entities not to provide services to those trading in “virtual currencies” (cryptocurrencies), as “disproportionate”.

What was done about Cryptocurrencies?

  • Ministerial committee recommendations, and warnings by institutions such as the RBI were: The problematic nature of their payment and exchange methods.
  • The use of virtual currencies over the Internet, despite the warnings and recommendation continued to remain legal in India.
  • The RBI circular was to choke the agencies that sought to provide a platform to facilitate trading in cryptocurrencies by cutting them off from banks.
  • This went against the entrepreneurial right to operate a business enshrined in Article 19(1)(g).

Issue with Bitcoin

  • Volatility came to be associated with Bitcoin (because of it being traded at a peak of $20,000 in mid-2018 before crashing to $3,000 by the end of the year) limiting its original purpose of becoming an alternative and stable currency that is not backed by any central institution but derives trust from its intricate blockchain ledger system.
  • Moreover, reports suggest that bitcoins, with their assured anonymity, remain popular with currency speculators, and in use in illicit transactions over the “dark web”.

Why did the Supreme Court strike down the Order

RBI has not come out with a stand that any of the entities regulated by it have suffered any loss on account of [cryptocurrency] exchanges.

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October 2022
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