(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.
43 (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
44 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
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