RBI lost the case, but can win the battle against crypto

The Enforcement Directorate (ED) is currently handling several cases regarding crypto businesses involving money laundering and fraud. Fraudulent initial coin offerings, phishing, NFT wash trade, etc. are rampant in the crypto-ecosystem and Indians have fallen prey to both foreign and domestic scammers, quite frequently.

The Reserve Bank of India (RBI) had historically opposed the crypto ecosystem and attempted to contain its growing threat. In 2020, the RBI failed in its efforts after losing to crypto firms in the Supreme Court.

Had the Reserve Bank of India (RBI) won the case, ordinary people of India might have been spared a lot of heartburn from crypto transactions, and the country would not have suffered huge financial losses due to money laundering.

Ironically, the grounds on which the Supreme Court ruled against the RBI may no longer hold due to multiple crypto scams and money laundering cases being investigated. If the RBI is dragged to court again due to similar actions, there is a good chance that the supreme court will rule in its favor. In fact, this time, crypto-exchanges like WazirX that are, allegedly, partially or fully owned by foreign entities, may not have the privilege of availing themselves of legal recourse, as in the previous case.

2018 IAMAI vs. RBI case

Since 2013, the RBI issued public circulars warning against digital assets. Growing public interest in the crypto ecosystem and, the absence of any government-initiated regulatory action, may have prompted the RBI to issue a circular to its subordinate entities, such as banks in April 2018, which stated – regulated entities are directed not to provide services enabling any person or entity to transact or settle virtual currencies, i.e. cryptocurrencies. This circular, issued on April 6, 2018, effectively brought cryptocurrency exchange activity to a screeching halt in India.

The crypto exchanges have banded together with the Internet And Mobile Association of India (IAMAI) and the latter filed a writ petition against the RBI’s opinion in the Supreme Court. A three-judge Supreme Court judgment overturned the disputed circular on March 4, 2020, following which ordinary people in India could transfer fiat money from their bank accounts to invest or trade cryptocurrencies, NFTs, etc.