What does the SC verdict mean for cryptocurrency, fintech innovations?

By Manish Kumar

The Supreme Court this morning struck down RBI’s curbs on cryptocurrency trade in India, calling them ‘illegal’. The order in effect lifted the ban on trading in virtual currency, cryptocurrency and bitcoins.

What does it really mean for cryptocurrency?


The verdict is important for many reasons. Apart from lifting RBI’s restrictions on crypto exchanges, and consequent enabling of operations of cryptoexchanges, there is a fair amount of other signals that may be read into or interpreted from this verdict.

First, the order upholds the principle of fairness and equal opportunity. The fact that the apex court outright shot down a strong policy step by RBI against a whole industry has consequences on the fairness of our regulators given their quasi-judicial status. Since the RBI curbs impact a whole innovative industry -- an industry that posed challenges to a whole setup of incumbent players under the regulators' active supervisory umbrella – it also means the industry was probably not provided equal opportunity to exist and grow.

Secondly, the verdict would raise questions on how our regulators understand themselves and their role and jurisdiction. RBI was formed under an act of Parliament and that act gives it powers to form regulations. Those regulations cannot, therefore, supersede the rights and freedoms given to citizens and corporations through acts of the Constitution. The right to create something that does not violate any existing law is an unsaid fundamental law (similar to the right to privacy – which became fundamental law only after a SC judgment, but was unsaid before that). When combined with the fundamental right to trade, it is not constitutional for the regulators to shut down industries, when they do not violate anything fundamental or are not fraud. This void in understanding was stifling fintech innovations and the SC verdict lifts that veil, albeit only by interpretation.

Third, by extension the SC verdict tells us regulation is not an absolute right or power, it’s a duty as well: Since the authority to regulate is vested with a single identified regulator, companies do not have a choice to go to anyone else. Similarly, the regulator also does not and must not have an absolute choice of killing an industry. It can surely decide the nature, degree and extent of regulation or even decide not to regulate, but stifling and choking is not one of the choices they may have. A reluctance to regulate something cannot be the reason enough to stifle or kill a full industry, and for that matter, even a single entity.

So, what impact will the SC verdict have on crypto tokens and crypto exchanges? This verdict gives a thumbs-up to the crypto exchanges and crypto as an asset class, as indirectly they have not been found violating any other law of the land. So, except for the RBI ruling, it in a way tells us that everything else was legit. Also, it upholds (and in a way decriminalises) the investors who have invested in cryptos.

All in all, the verdict removes the arbitrariness of regulatory actions even though it does not disgrace it at all.

(Manish Kumar, a fintech entrepreneur, is co-founder of GREX and RealX. Views are his own)