RBI has no authority to ban cryptocurrencies, says Internet and Mobile Association of India (IAMAI)

• IAMAI told the Supreme Court that RBI's action against private businesses in the form of a circular is illegal.
• IAMAI says RBI banned cryptocurrencies on "moral grounds" and that it is arbitrary, unfair and unconstitutional.

Earlier, there were talks about a Reserve Bank of India (RBI) circular regarding the prohibition of cryptocurrency-related services offered by banks and other financial institutions. However, the Internet and Mobile Association of India (IAMAI) told the Supreme Court that the RBI did not have the authority to issue a ban.

"RBI cannot step out of its powers as set out in the Banking Regulation Act. Therefore, its action against private businesses in the form of a circular is illegal," IAMAI counsel Ashim Sood said.

He also highlighted that there was no research undertaken by the central bank before issuing the ban. Advocate Sood informed the court about definitions of 'virtual currency' and cited multiple sources to show that different types of virtual currencies exist. He stated that the circular is vague as it does not define virtual currencies. 

In support of his petition, the counsel cited various judgments and cited the acts of regulations taken up by the G20 nations like the US. According to the April 6 circular last year, the institutions regulated by the RBI are banned from "providing any service in relation to virtual currencies, including those of transfer or receipt of money in accounts relating to the purchase or sale of virtual currencies."

IAMAI revealed that the RBI had banned crypto on "moral grounds" as no research was conducted to study the effect of these virtual currencies on the economy. The association also said that the blockchain technology adopted in these virtual currencies was not disputed, and therefore, a ban was "arbitrary, unfair and unconstitutional." The court has listed the case for next Tuesday for further hearing.