The government on Thursday informed the Supreme Court that an expert panel has recommended complete ban on private cryptocurrencies in the country and the Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019, will be introduced in Parliament in the next session.
The inter-ministerial committee, set up to look into the legality of cryptocurrencies, had last month recommended ban on private cryptocurrencies and asked the government to consider launching its own digital money. It, however, said the government should keep an open mind on the potential issuance of cryptocurrencies by RBI.
The draft law also criminalised the use of private cryptocurrencies and recommended fine and imprisonment up to 10 years for anyone dealing in the virtual currency.
A bench led by justice RF Nariman posted the matter for further hearing on Wednesday. Last year, the apex court had refused to stay the RBI’s April 6 circular that had virtually banned banks and financial institutions from providing services to any individual or business dealing in digital currencies within three months. The banks and bourses have closed down their operations since July 6 last year.
The SC is hearing a batch of PILs including one by the Internet and Mobile Association of India challenging the RBI circular that declared cryptocurrency related businesses like virtual currencies, crypto assets, etc as illegal in India. Even RBI’s transfer petition is before it.
Alleging infringement of their right to trade that is guaranteed in the Constitution, the petitions state that RBI lacks the authority to classify crypto asset as legal or illegal assets, but is seeking indirect, colourable means to outlaw crypto assets, which as per the finance ministry do not qualify as ‘legal tender’ in India.
The petition including the one by a group of eleven different representatives from various crypto-related businesses like cryptocurrency exchanges, their shareholders and traders argued that RBI’s circular that mandated banks, e-wallets, and payment gateway providers to withdraw support for cryptocurrency exchanges and other businesses dealing with virtual currencies in India was baseless.
Earlier, RBI had told the Supreme Court that it is necessary to regulate Bitcoin and other cryptocurrency in India as it encouraged “illegal transactions” and impacted international flow of funds.
The expert panel which was constituted on November 2, 2017 said that the private cryptocurrencies are inconsistent with the essential functions of money/currency, hence private cryptocurrencies cannot replace fiat currencies. “There is no underlying intrinsic value of private cryptocurrencies. These… lack all the attributes of a currency. There is no fixed nominal value of these private cryptocurrencies. They neither act as any store of value nor they are a medium of exchange,” the panel stated in its report, noting that since their inception, cryptocurrencies had demonstrated extreme fluctuations in their prices.