Namaste Tribe! Thanks to our very own Crypto Kanoon, we got to see the live updates of today’s hearing.
Click here to share today’s consolidated hearing updates
Today at 11:07 AM:
👉 Mr. Ashim Sood has started to clarify his earlier made arguments on Financial Stability Reports.
👉 Mr. Nakul Dewan has opened his arguments.
👉 Mr. Dewan is giving description of the Petitioners in his Petition. Judge asks some of them are IIT products. Counsel nods.
👉 RBI says Crypto has no intrinsic value. Counsel argues on this logic the Fiat currency also has no value since the gold backing has been taken away.
👉 Example of drone regulations has been taken to explain the mitigation of risks of the activity which is otherwise risky on many aspects.
👉 Effect of RBI bank is being discussed. The Govt. has also expressed that if we ban Crypto, it will decrease the ability of law enforcement agencies to monitor to activity.
👉 Exchanges business is completely dependant on banking channel. If RBI cuts banking channels it directly cuts our activity.
👉 We agree that there are risks, but what could be proportionate measures. Counsel is reading out a report from his brief.
👉 Even today Crypto is not banned in India. Counsel is giving a historical view of money and how it developed over a period of time.
👉 Judge makes a remark “Animals to Metals to Papers to Paperless”
Crypto Kanoon
👉 Explaining exchange business. Suppose if Crypto is a game then I need to use the legal tender to enter the game. Without legal tender I cannot enter the game.
👉 Counsel is taking example of Air Miles to explain the similarity of Crypto with other Schemes which have been in operation for long.
👉 You can use these points to have a flight in other airlines which Air India has a tie up with. You can even go to taj and have a meal by using these very points.
👉 RBI doesn’t seem to stop such arrangements and schemes despite Crypto and these schemes being similar in nature.
👉 Judge interrupts and asks do you think both are same? Since one cant be encashed completely and can only be exhausted in availing other services.
👉 Counsel answers RBI has not expressed any such concern behind their action.
👉 Certainly there are differences but the economic nature of both are same. People can choose to buy Air miles from each other against legal tender
👉 There are 2 things that a Crypto does. Its creation is that of a ‘good’ by the work of validation. Another is the medium of exchange for the group of people who recognize value in it.
👉 Court says When you say it is a medium of exchange then it must be controlled. Counsel responds that it can be used as a medium of exchange and the legislature knows it. Legislature knows the exact position but it did not choose to pass any law.
👉 Counsel is refering to a judgement of US Court on the issue of whether stock can be classified as money or not.
👉 It was held in this judgment that stock options are not money.
👉 The Counsel refers to the definition of Goods from Indian Sale of Goods Act. it is anything movable which is not actionable claim and money.
👉 Singapore International Commercial Court judgment is referred to which held it to be an intangible property.
👉 A US judgment in SEC v. Shavers has been referred to by the counsel.
👉 Now the counsel is making submissions on Powers of RBI under different Acts.
👉 Banking regulation is being discussed.
👉 There are certain transactional business in which the banks enter which are mentioned in Section 6(1) A to 6(1) O. And Section 35A empowers RBI to prohibit a transaction or class of transactions.
👉 But the RBI can only prohibit the transactions in the light of Section 6(1) A to Section (1) O.
👉 Now the Counsel is refering to the Petitioner’s representation made to RBI. RBI response at one place mentions that “technological innovations like VCs not to be encouraged…”. Counsel says that it is not under the domain of RBI to encourage and not to encourage.
👉 RBI can not take away the banking channel from me when the Country does not stop me from doing this economic activity.
👉 Counsel making submissions on the point of unreasonable classification. Examples of Unidirectional and Bidirectional schemes are being stated how both end up in conversion into legal tender.
👉 If RBI says that we are restricting you because you are convertible to legal tender at entry and exit levels. Then this applies to all kinds of similar schemes like air miles.
👉 Now Counsel briefly made submissions on Doctrine of Proportionality and concludes his arguments.
👉 Mr. Shyam Diwan has opened his arguments on behalf of RBI.
👉 Crypto is a new creature and regulators across the world are responding to it. Variety of responses are there as per the experiences of diff. jurisdictions.
👉 RBI has acted keeping in mind the inputs from diff. jurisdictions and domestic need of the country.
👉 The view of the inter-ministerial committee is that Crypto ought to be prohibited.
👉 Our purpose is to adopt nip in the bud approach in order to ensure that Payment system is protected and other alternates are not allowed to pop up in the economy. And we are empowered by law for this.
👉 Crypto could be a store of value or commodity, but we see it as a digital means of payment.
👉 Govt. has maintained its stance throughout that Blockchain is a tech. and Crypto is digital means of payments. Its value is derived from users confidence in it and is highly volatile.
👉 Crypto ecosystem may affect the existing payment system and influence the economic policy.
👉 I am not a crime detector or a tax collector. But since I am the protector of monetary policy and the monitor of cross border transactions, it comes under my domain to restrict this in the interest of monetary policy.
👉 RBI is alive to all the risks which is involved with Crypto including Money laundering, tax evasion, terrorists financing etc. and apart from this RBI is also alive to all the responses to the inputs received from diff. jurisdictions.
👉 The Counsel is giving account of the important dates related to Cryptocurrency.
👉 Counsel also gave introduction of Satoshi Nakamoto. Judges also knew certain facts about Satoshi which they shared.
👉 RBI has time and again issued cautions about the legal and operational risks pertaining to Cryptocurrencies to users holders and traders. Counsel apprise the court with the market cap of Cryptocurrencies.
👉 Crypto payments take place in peer to peer system without an authorized agency which expose the user to the risk of having no legal recourse.
Crypto Kanoon
👉 The Court rose up for the lunch. Stay tuned.
👉 Silk Road and TOR is being discussed from the FATF report.
👉 Example of Western Express cyber crime group is being given.
👉 October 2015 FATF report is being referred to which speaks of emerging risk of terrorist financing.
👉 Many websites affiliated to terrorist organisations take donations in bitcoin.
👉 Counsel is reading out diff. consumer protection issues .
👉 Implications for monetary policy is being referred to from the report.
👉 It may result in the lesser bank reserves and more investments into digital currencies.
👉 RBI Financial Stability Report FSB which seeks to explain complexity of monetary system.
👉 In a complex financial market, even a small challenge may result in deep adverse effect.
👉 There has been continuous deliberation and application of mind about risks and potential threats posed by VCs. So far as technology behind this is concerned, it may be harnessed in a constructive manner.
👉 This restriction on banking entities has been imposed after giving number of warnings about the risks involved in dealing with Cryptos. This is the most calibrated action.
👉 The Counsel is moving ahead with the list of dates covering various events unfolded over the last few years one by one.
👉 Recommendations of Inter-disciplinary committee are being referred to.
Issue clear warning to users of exchanges. Issue warning to those who offer to buy or sell Crypto. Take action against who still does it with the presumption that the purpose is illegal
👉 Judge asks a question what happened to Crypto Token Bill 2018 which was drafted on recommendation of inter disciplinary committee report dated 2017.
👉 Counsel says the recommendation were not accepted and Inter Ministerial committee was formed.
👉 In 2016 RBI set up Inter regulatory group to study digital banking. This also included fintech companies apart from regulators.
👉 Counsel intermittently mentions that RBI has conducted detailed study before taking action and all these steps are indicative of this fact.
👉 RBI recognizes that Crypto is negligible today but it will undermine the formal Payment system which we regulatory. For total economy it may be small but it has immense potential to impact the system including cross border capability.
👉 27 Nov. 2017, minutes of working committee meetings are being read out.
👉 Lot of intermediaries have emerged as exchanges. Investors have made lot of gains but sudden crash could wipe out such gains.
👉 Judge asks that till the time people are not using VCs as legal tender, they are legal?
👉 CounSo far as VCs are concerned, in India VCs. are not illegal and there is no ban in place. No prohibition is there.
👉 But the issue of maintaining financial stability confers power on the RBI.
👉 A research paper is being read which speaks about use of Cryptos by Jihadist groups.
👉 Now Counsel refers to minutes of 2nd inter ministerial committee meeting dated 6th March 2018.
👉 Member SEBI mentioned during this meeting use of VCs are likely to grow and due to its nature, regulating it by a single regulator would not be feasible.
👉 The meeting was concluded with the opinion that Cryptos should be banned.
👉 IMC Committee report is being read.
👉 5th April 2018 press release was read out and the counsel says that so far as the press release differentiates between Digital currencies from Pvt. Digital currencies, it is clear that Circular of 6th April was passed by excellent understanding.
👉 IMC report is being referred to through which the Banning of Cryptocurrencies Bill was submitted to the Govt.
👉 Fundraising by ICOs as an alternative to startup financing is being discussed from the report.
👉 Many companies raised funds by ICOs without having any tangible product. By the start of 2018, total funds raised by ICOs reached to $20 Billion
👉 No country in the world treats Crypto as legal tender.
👉 Diff. between Fiat and VCs is that the former is completely backed by the Govt.
👉 Since Crypto is backed by trust and consensus based algorithm, the transaction processing is time consuming.
👉 These are the excerpts of the IMC report which the Counsel is reading out
👉 Counsel is now reading out the report excerpts related to Energy resources required for Cryptocurrencies.
👉 Non official VCs make it difficult for the regulators to carry out their mandate.
👉 IMCs recommendation of banning Crypto and prohibit all participatory activities, are being read.
👉 Counsel referred to the draft bill and said this is the recommended bill which the Govt. may or may not accept.
👉 Hearing ends here. The RBI counsel to continue his arguments tomorrow.
*Above content is migrated from medium to wazirx blogDisclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
