Xii in any case there is no complete ban on virtual

(xii) In any case, there is no complete ban on virtual
currencies or on the use of distributed ledger technology by
the regulated entities.
(xiii) The impugned decisions were necessitated in public
interest to protect the interest of consumers, the interest of
the payment and settlement systems of the country and for
protection of regulated entities against exposure to high
volatility of the virtual currencies. RBI is empowered and
duty bound to take such pre-emptive measures in public
interest and the power to regulate includes the power to
prohibit.
(xiv) The impugned decisions were necessitated because in
the opinion of RBI, VC transactions cannot be termed as a
payment system, but only peer-to-peer transactions which
do not involve a system provider under the Payments and
Settlement Systems Act. Despite this, VC transactions have
the potential to develop as a parallel system of payment.

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(xv) The KYC norms followed by the VCEs are far below
what other participants in the payments and monetary
system follow. In any case, KYC norms are ineffective, as
the inherent characteristic of anonymity of VCs does not
get remedied.
(xvi) Cross-border nature of the trade in VCs, coupled with
the lack of accountability, has the potential to impact the
regulated payments system managed by RBI. A large
constituent of the VC universe does not hold membership
of the Petitioner association or is not even accountable for
their acts but is material and instrumental in driving the
VC trade.
(xvii) RBI or any other Government authority would not be
able to curtail, limit, regulate or control the generation of
VCs and their transactions, resulting in ever-present and
inevitable financial risks.
6. UNFOLDING OF THE PLOT
6.1. In the light of the above factual matrix and the rival
contentions, let us now see how the plot before us, unfolds.
I. No Power at all for RBI (Ultra vires)
6.2. The first ground of attack revolves around the power of RBI
to deal with, regulate or even ban VCs and VCEs. The entire

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foundation of this contention rests on the stand taken by the
petitioners that VCs are not money or other legal tender, but only
goods/commodities, falling outside the purview of the RBI Act, 1934,
Banking Regulation Act, 1949 and the Payment and Settlement
Systems Act, 2007. In fact, the impugned Circular of RBI dated 06-
04-2018 was issued in exercise of the powers conferred upon RBI by
all these three enactments. Therefore, if virtual currencies do not fall
within subject matter covered by any or all of these three enactments
and over which RBI has a statutory control, then the petitioners will
be right in contending that the Circular is ultra vires.
6.3. Hence it is necessary (i) first to see the role historically
assigned to a central bank such as RBI, the powers and functions
conferred upon and entrusted to RBI and the statutory scheme of all
the above three enactments and (ii) then to investigate what these
virtual currencies really are. Therefore, we shall divide our discussion