After 2 years, on 4th March, 2020 the Three-Judge Bench of Supreme Court of
India comprising of J. Rohinton Fali Nariman, J. Aniruddha Bose and J. V.
Ramasubramanian made clear that use of crypto currency and trading via the same
is legitimate. This meant the letter issued by the RBI and Finance Ministry of
India, which seized the rights of crypto currency companies and users held no
What is Crypto Currency?
Crypto currency is decentralized digital asset, which is based on a Block chain
(a system of recording information which makes it difficult to change or cheat a
system) mechanism. People use crypto currency for quick payments and some also
invest in digital money which can be done through a credit card in hope of
higher returns in future, this is also called as “mining”.
How does it work?
It can be thought of as any digital payment method like PayTm and PayPal
wallets, where a user can use the coins with the credit or debit cards. They can
also use the same for trading and investments. The crypto currencies can be
accessed using wallets. Crypto credit can be bought either by a broker or can be
obtained by trading on online crypto currency exchanges. Major difference
between the money in the banks(cash, credit in accounts) and crypto currency is
that they are controlled by a regulatory body eg. RBI and the latter is managed
by computer algorithms.
Crypto currency first announced itself in the Indian market back in 2009 and for
the first time used the same way as “cash” in 2010 when a pizza shop in Mumbai
started to accept BitCoin as a mode of payment. However it was the year 2013,
when things really started to change for good in the Digital Trading world with
new developments in technological sector announced and with people from all
sections of the society started to invest and trade, at this point the
government only issued a notice siting the risks and snags of Digital Trading.
The number of users skyrocketed between 2015 and 2017 when demonetization was
announced by the NDA government. People and business’s with huge capital looked
for alternatives to invest their money, in order to save tax and keep their
money safe. This resulted in Crypto currency investments gaining pace like never
before in the Indian sub-continent.
After a few months, there were a significant number of people and corporations
who were using crypto currency as a means for trading and it became an
alternative of money during the tough times of demonetization. The Indian
government was not against the crypto currency and its system until several
cases of fraud started to emerge and number of people getting drastically low or
sometimes high returns was also reported.
In response to this the government set up a committee which under the
chairmanship of Shri Subhash Chandra Garg, Director, Department of Economic
Affairs, Ministry of Finance and composed of Shri Ajay Prakash Sawhney
(Director, Ministry of Electronics and Information Technology), Shri Ajay Tyagi
(Chairman, Securities and Exchange Board of India) and Shri B.P, the Government
of India formed a high-level Inter-Ministerial committee to look into the loop
holes of the Digital Trading World .
After the submission of the report from the committee, the RBI along with
Finance Ministry issued a notice stating, the use of any form of crypto currency
as illegal and it also instructed the banks to stop facilitating services
involved with crypto currency immediately. This sent shockwaves to the people
and corporations associated with the use of digital trading. The main impact of
this was a significant number of fall in trade, share prices and with the banks
gone as an intermediary for money exchange, the companies feared their
existence. After which a written petition was filed in the Supreme Court by the
members of IMAI on 15th May,2018.
The decision of the bench meant a huge relief for all the players of crypto
currency. The 180- page decision given by the 3-judge bench was well framed,
with over fifty references of other country laws and it cleared all the doubts
related to crypto currencies. This decision also had an effect on the market as
several trading companies like Zebpay, ThroughBit etc. which had shut down their
services, announced their return in the Indian market and the judgement also
meant that all the bank accounts frozen which had crypto exchanges should make
the same accessible to the customers with immediate effect.
The decision brought elation to the CEO’s of trading units and they heaped
praise on the judgement and stated 4th March as a historic and revolutionary day
for the Indian digital market and its players. On the other side several experts
and personalities from the Indian fiscal background had opposite views as they
said that still crypto currency is never safe from scams, it can be used as a
channel for money laundering. They argued that RBI worked in best interest of
the citizens of the country by protecting them from a system with significant
Other’s added that RBI should respect the judgement passed by the honourable
court and should make separate guidelines for the use of crypto currencies in
order to protect the market and the rights of people. The RBI released a
statement saying it will file a review petition in response to the given
judgement, which said that RBI failed to prove how the use of crypto currency
will jeopardize the banking system.
Arguments that made an impact and the courts judgement:
IMAI which was represented by Advocate Ashim Sood, argued that crypto currency
should be looked as 'commodities rather than currency', he also stated that
'Since the beginning crypto entities have argued that the circular issued by the
RBI violates Articles 19 (1) (g) and 14 of the Indian Constitution and at the
same time, this will lead to the closure of such firm.
The Article 14 ‘Equality Before Law’ states that the state shall not deny any
person equality before the law or the equal protection of the laws within the
territory of India, prohibition of discrimination on grounds of religion, race,
caste, sex or place of birth. As per Article 19 (1) (g), all citizens shall have
the right to practice any profession or to carry on any occupation, trade or
business'. In his 104 page written submission he said that RBI (represented by
Advocate Shyam Divan) has no capacity to issue such circular which violates the
fundamental rights of citizen and is also outside the RBI’s regulatory
The three judge bench stated 'The impugned rule cannot be considered to be
proportionate.' Their rationale was based on the fact that the RBI did not
notice that virtual currency trading practices did adversely affect the
institutions it controlled. This was not banned in the region, even as virtual
currencies were not. 'But the trade-in VCs and the working of VC exchanges are
sent by the impugned circular to comatose by disconnecting their lifeline
namely, the link with the normal banking system', the order said. 
Future of Crypto Currency:
India has been making rapid strides in the field of technology and banking
systems and with the government trying to push for a digitized payment system
all over the country, Crypto currency brings in employment, provides an
alternative of cash as a payment method, and also promotes India at a global
level in terms of economy.
Today the total cap value of crypto currency exceeds over $237.11 Billion.
Still, India isn’t aloof from frauds. Reports suggest that numerous scams take
place every day and the government and RBI need to work towards creating a much
safer digital ecosystem and make people aware about such frauds in order to
prevent any future mishap.
The guidelines and laws related to digital trades and money transfer should be
made furthermore rigid and proper checks are required to be done at each step in
order to prevent cases of tax evasion and money laundering, making it properly
regulated and controlled. With the highest population in the world still crypto
currency users of India contribute only 2% in the BitCoin world. The government
should study the laws of countries like Australia, Switzerland, New Zealand etc.
where crypto currency has been in use for a long time, in order to protect the
rights of consumers and create a secure environment in the trading market.
Award Winning Article Is Written By: Mr.Harsh Shekhar
Authentication No: MA33889129987-03-521