Since man evolved currency has been evolved and is a very important part of society. Currency has been an integral part of our lives. In the Ancient era, we used barter system meaning we did exchange money in form of goods and services amongst each other. But, barter system lost its impact within few decades. After realizing barter system didn’t work, modern currency ( which we use) came into existence.
History of currency
The currencies are controlled by Banks and Government.
Cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a digital ledger or computerized database using strong cryptography to secure transaction record entries, to control the creation of additional digital coin records, and to verify the transfer of coin ownership. It typically does not exist in physical form (like paper money) and is typically not issued by a central authority. Some cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems. When a cryptocurrency is minted or created prior to issuance or held on a centralized exchange, it is generally considered centralized. When implemented with decentralized control, each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.
Bitcoin, first released as open-source software in 2009, is the first decentralized cryptocurrency. Since the release of bitcoin, over 6,000 altcoins (alternative variants of bitcoin, or other cryptocurrencies) have been created.
Cryptocurrency is a digital or virtual currency which is meant to be a medium of exchange. Cryptocurrenceis to secure financial tranSupreme Courtations, crontol creation of addition units, and verify the transfer of asests. Cryptocurrencies are used to decentralize control as to oppose centralize digital currency and central banking system. The decentralized control of each currency works through a disturbed ledger techonology, typically a blockchain, which serves as public financial tranSupreme Courtations database.
Blockchain is basically the record of the tranSupreme Courtations done by the users which are linked and secured using cryptography.It is similar to real world currency it does not have any physical embodiment. It alsoused cryptography to work the way it does. It is called blockchain via which we are able to generate/access the cryptocurrency.
Biticion is a type of currency which was the first to be released as open source in 2009. It is generally considered the first decentralized cryptocurrency. It allows users to interact with each other but not with real-life accounts.
Types of cryptocurrency
Some features of cryptocurrency
The main features of cryptocurrencies are that they are trustless, immutable and decentralized.
In India, after the launch of Bitcoin a number of cryptocurrency exchanges began to operate. But they were working in what was really a regulatory vacuum. There was not only no clear definition of what a cryptocurrency was but there was also no law that prohibited or regulated their use. This situation prevailed until April 2018, when the Reserve Bank of India issued a circular, not banning the use of crypto currencies themselves, but the provision of banking services to any person who dealt with such currencies.
Supreme Court Verdict
Internet and mobile association of India v. Reserve Bank of India
In a 180-page long judgment, authored by Justice V Ramasubramanian, the Court Obeserved that while the RBI has the power to regulate Virtual Currencies, the prohibition imposed through the April 2018 circular is disproportionate, and, therefore, ultra vires the Constitution.
According to the Court, the RBI’s circular, in imposing a wholesale moratorium on the provision of banking services to these dealers, unreasonably impinged on what is otherwise a valid vocation, by going beyond the limitations permitted under Article 19(6).
In 2018 a circular was passed by Reserve Bank of India. Itbanned banks from dealing with Virtual Currency exchanges and individual holders on the grounds that these currencies had no underlying fait. Reserve Bank of India held that it was necessary in public interest.
The hon'ble supreme court set aside April 6, 2018 circular issued by Reserve Bank of India prohibiting banks and financial institutions from providing services in relation to cryptocurrencies. The court found that the prohibitive circular is disproportionate.
Reserve Bank of India argued that the decision was taken to prevent cryptocurrency industry from affecting payment service in India. The circular was challenged by Internet and mobile association of India and argued India has consumer protection and anti - money laundering laws which could be applied to virtual currencies rather than banning them. Reserve Bank of India argued they do not want these virtual currencies to spread like a contagion and had therefore, in larger public interest asked banks not to deal with people or exchange dealing with these non- fiat currencies.
Further, contentions by the petitioner, any trade in the cryptocurrency was not illegal within the ambit of the Constitution of India. The ban would remove cryptocurrency trade from the formal economy and it may get traded through illegal routes or hawala (can be considered going into the black market).
Further, pleaded the trade and dealing which takes place is not illegal and is legitimate business activity. The assets are classified as commodity (Virtual Currency) not as currency so, anyways it doesnot come under the jurisdiction of Reserve Bank of India. Hon’ble Court observed that the ban imposed by Reserve Bank of India did not pass the “test of proportionality” of any action by the Government. The Court held that the it must pass the test of Article 19 (1)(G) which states that all citizens of the country will have right to practice any professionor carry on any occupation or trade and business.
Court observed every court which attempted to fix the identity of virtual currency merely acted as the 4 blind men in the Anekantavada which is philosophy of Jainism, who attempt to describe an elephant but end up describing only one physical feature of elephant. Similarly, with bitcoin (of Virtual Currency) . Court indicated that the central bank should have opted for a less invasion mechanism to control the pitfalls of cryptocurrency. Virtual Currency is umbrella term for all forms of non -fiat currency. Virtual Currency mostly are created, distributed and accepted in local virtual networks. Cryptocurrencies have extra security in form of algorithms. Even if a blanket ban of any sort could push the entire system underground which in turn would mean no regulation.
Impact of the decision
The crypto community has hailed the top court decision, and it could be game-changer for many startups and crypto exchanges who have either closed their operations or shifted their base from the country. It could lead to Reserve Bank of Indiarethinking its policies surrounding Virtual Currency.
Reserve Bank of India will reconsider its approach to cryptocurrency and come up with a new, calibrated framework.