The Supreme Court is justified in striking down an April 6, 2018 circular of the Reserve Bank of India, which bans financial institutions from enabling deals in digital or cryptocurrencies. Ever since bitcoin, the first cryptocurrency that emerged on currency markets in 2009, governments, central banks and conservative finance managers have viewed the rise of digital currencies with suspicion. The debates around the past, present and future of cryptocurrencies as a financial asset class, and as an alternative to central bank-controlled currencies post the 2008-09 meltdown, were filled with an excess of apprehension.

Interestingly, India, aiming to be a digital economy powerhouse by embracing emerging technologies and employing them to harness economic activity, has also embraced this sense of misgiving. The RBI has viewed trade in bitcoin and other cryptocurrencies with extreme suspicion, citing their alleged involvement in money laundering and drug trafficking, and has time and again advised investor communities and financial institutions to exercise caution. The RBI’s crypto deal ban of April 2018 has caused immense damage to a cluster of investors and entrepreneurs who, taking a cue from the global markets and their peers overseas, had invested precious monies into building financial products and solutions around cryptocurrencies. In the February 2018 Budget, the then Finance Minister stated that the government did not consider cryptocurrencies as legal tender or coin and would take measures to eliminate their use in financing illegitimate activities. In mid-2019, news that the Centre was considering a draft regulation that would criminalise mere possession of cryptocurrencies forced scores of crypto fans to log out of their terminals. Those who didn’t, started looking for quasi-legal or even illegal routes to trade the digital currency in the shady alleys of cyberspace. Oddly enough, this is happening at a time when criticisms levelled against cryptocurrencies have by and large been debunked; major companies, including Facebook, are rolling out their own versions of digital currencies.

Now that the SC has held that the RBI ban is in violation of the freedom to carry on trade guaranteed by Article 19(1)(g) of the Constitution, the crypto community can heave a sigh of relief. In all likelihood, the SC ruling will have an impact on the draft crypto law in the making. Gartner forecasts that blockchain, the technology that powers cryptos, will generate $3.1 trillion in new business value by 2030. Cryptos themselves are a $800-billion market globally. The Indian crypto market was worth over $13 billion prior to the 2018 crackdown. The SC ruling should also be a wake-up call for the central bank and policy mavens. A ‘when in doubt, cut it out’ approach cannot work well in addressing issues and products that are product of technological advancements. The best approach to adopt is one of cautious optimism and creative regulation.

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