An Analysis of RBI vs

IMAI (2020): Exploring

the Legal Implications
and Regulatory
Perspectives
Introduction

The Supreme Court

has declared the
circular issued by the
Reserve Bank of India
(RBI) as illegal,
thereby rendering the
guidelines of the
circular
unenforceable.
 Background
Reserve Bank of India (RBI) issued a
circular dated 6th april,2018. The circular
do prohibits the bank and other entities
too from trading in virtual currencies.
Moreover the circular do barred the
banks to provide any kind of services to
any individual or entity dealing or
setting virtual currencies. The
prohibition issued by the Reserve Bank
of India had a negative effect on the
Indian economy as because the
mediums (the bank accounts), through
which virtual currencies were traded
could no longer be maintained or
operated therefore an end to the
business through virtual currencies do
prevailed.
 The matter was
challenged by Internet
and Mobile
Association of India.
The Supreme court of
India allowed the
petition on the ground
of proportionality.
Earlier in 2013 the
Reserve Bank of India
do issued a public
caution to the traders
and holders of virtual
currency in context
with the legal and
security related risks
associated with it.
 Regulatory
Perspectives

The services which RBI directed

the bank not to deal with were-
maintaining the accounts,
registering, trading, settling,
clearing, giving loans against
virtual currencies, accepting
virtual currency as collateral,
opening accounts of exchanges
dealing with them and transfer
or sale/purchase of virtual
currencies.
 LEGAL ASPECT

The court was of the view that although Reserve

Bank of India has wide powers and do plays an
important role in the upliftment of Indian
economy, but here they are unable so show any
sought of damage suffered by it's regulated
entities. Therefore the guidelines issued by the
Reserve Bank of India, directing the banks to
stop dealing or providing services to the entities
trading in virtual currencies are illegal hence
unenforceable.
Petitioner's contentions The petitioner
contended that Reserve Bank of India do lacks
the jurisdictions to disallow the trade of virtual
currency (crypto currency) moreover the ban
imposed by RBI is based on the mis-
understanding of RBI. The Petitioner also
contended that the Virtual currency or the
crypto currencies are not a kind of currency
note or coin but a medium of exchange or a
store of value.
 CONCLUSION
As per the above mentioned points and the judgement it is clear that that
petitioner succeed and the circular issued by Reserve Bank of India is declared
to be un-enforceable. Due to the judgement, the businesses can rejoin the
industry and hence can trade in Virtual currencies (crypto currency). However
it is important to know that the Supreme Court in it's judgement have only
stuck down the circular issued by the RBI but have not declared the virtual
currencies as legal or illegal, moreover since their is no legislation regarding
the same therefore virtual currencies remain unregulated in India.
 THANK YOU

NAME: DIPANSHUK AMBASTHA

CLASS: DIVISION 'D'
ROLL NO: 36