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1. INTRODUCTION
The Indian banking industry and the laws governing it have seen a massive change since the era of economic liberalization almost 30 years ago.1 The adoption of fintech in overhauling the economy has been significant. However, one of fintech's recent components, Virtual Currencies (VCs), have often been animadverted by Indian government agencies. This has been due to the Reserve Bank of India's (RBI) incertitude regulating VCs, as they are the central bank responsible for regulating banking in India.
The lack of clarity around VCs was resolved by the Supreme Court of India in March 2020 as it gave a landmark judgment in the case of Internet and Mobile Association of India v. Reserve Bank of India? The unanimous decision struck down a circular notified by the RBI, which banned all transactions involving VCs over digital exchange platforms in the market. The Internet and Mobile Association of India (IAMAI or "petitioners") and an association of VC traders challenged the circular on the grounds that a total ban was an excessive overreach of the RBI's powers, and a disproportionate measure against the interests of VC holders. The principal issues before the Court were whether the structural nature of VCs would allow them to be regulated by the RBI? Whether the RBI's directions were pre-emptive and unreasonable? Lastly, whether the RBI did indeed exercise its powers disproportionately to the petitioners' fundamental right to trade freely?3
This case comment begins by highlighting the imperative banking laws which help the RBI facilitate their power over banking in India. It then explains how the Court recognizes the dubious nature of VCs through the lens of both international and domestic laws and decisions. It moves on to discuss the extent of RBI's powers in relation to banning VCs. Lastly, it analyzes the Court's observations on the legality of the ban, setting up a climactic finale for both parties.
2.THE EMANATION OF RBI'S POWERS
The RBI derives its powers from three primary pieces of legislation:
a) The Reserve Bank of India Act, 1934 ("RBI Act"): The cardinal of all, the RBI Act enables the RBI to take over the management of the currency and carry on the business of banking in the country.4 The RBI is responsible for managing public debt...