New Crypto Bill 2021: An Analysis
Written By: Pulkit Taneja
Introduction:
Cryptocurrencies are privatized, digital currencies which decentralize the currency and the money exchange systems. In India, currency regulation is handled by the Reserve Bank of India. Cryptocurrencies set up an exchange program on a server, where without any interference by the RBI, an exchange of currency takes place. Apart from being used as an alternative to transferring regulated currency, crypto assets are also used as investment options.
The Ministry of Finance in 2019 set up a committee subjected to ‘Propose Specific Actions to be taken in Relation to Virtual Currencies’. In its report, this committee recommended the ban on crypto-currencies. The committee’s outright ban on this industry has caused turbulence. People and organizations are opposing this view of the committee henceforth the government has questioned the legality of this bill following the constitution. This article would be analyzing the arguments against this proposed recommendation and the committee’s report to understand the legality of banning cryptocurrencies in India.
Constitutionality of the proposed legislation
The potential cryptocurrency bill which aims to ban the use of private cryptocurrencies is already being scrutinized for violating important aspects of the Constitution. Article 19(1)(g) of the constitution of India, guarantees a right to every citizen of this county to trade and conduct business. People who trade in crypto-assets have a fundamental right to carry on with their business and trading activities.
The state only in some cases where a person proposes to carry on a business which is detrimental to public welfare like buying and selling of drugs and human trafficking can restrict this right, however trading in cryptocurrencies is neither immoral nor criminal in nature. To support this argument, I would like to refer to the IAMAI case.[1]
The apex court in the IAMAI case recognized a person’s right to trade or do any business activity with cryptocurrencies under article 19(1)(g) of the constitution. The constitution also recognizes the right to life and liberty in Article 21. The evolution of the right to life and personal liberty can be documented and theorized by analyzing many relevant supreme court cases in the last decade. The right to life also includes the right to make a choice. A person who in accordance with this right chooses to invest his/her money in crypto assets must not be restricted. Article 300 A of the constitution deals with the right to property.
The scope of this right extends to various intellectual properties including but not limited to trademarks, copyrights, and patents. The supreme court in the judgment of KT Plantation v State of Karnataka, recognized the abovementioned scope of article 300 A. Crypto-assets and cryptocurrencies are assets or property of an individual on the internet which can be traded, bought, and sold. Although, right to property is not a fundamental right of an individual it still is a constitutional right that cannot be infringed by any arbitrary or discriminatory manner by the state.
Report of the Committee:
The draft bill banning cryptocurrency and regulation of the official digital currency bill of 2019, outrightly bans and criminalizes the trade, buying and selling, and any consultation or any services in relation to crypto-assets. This recommendation was given by the committee on the basis of risks that relate to cryptocurrencies. Issues like money laundering, cross-border funding to illegitimate organizations, etc. are proposed to be affected by this bill.
Various other developed economies including the members of the G20 have never expressed any draft or proposed legislation for an outright ban of cryptocurrencies. Although countries like China and Saudi Arabia have restrictions on the use of cryptocurrencies, the regulations are well developed and considered reasonable. The risks of cryptocurrencies are already accepted by many developed economies of the world, but none is planning to criminalize the trade and use of cryptocurrencies.
Laws specific to the risk could be drafted which would be in conjunction with a new cryptocurrency bill to regulate and supervise its use. For example, drafting an effective and efficient anti-money laundering bill would be a better option than banning cryptocurrencies altogether. Issues like cybercrime and cyber fraud must not be referred to and compared with cryptocurrencies. Statues like the IT Act deals with any criminal intent based on the internet.
The committee has also yet to ponder upon the reason for such urgency in drafting this bill. There have not been reports of any imminent and immediate risks posed by cryptocurrencies to the RBI or any individual. No report from the RBI mentions the ill effects of crypto-assets and cryptocurrencies on the economic stability of this country. The proposed ban on cryptocurrencies, is based on potential risks however, to avoid any economical or financial risks, the state must not be unreasonable in restricting fundamental rights.
Conclusion:
The proposed cryptocurrency bill is not only developed for supposed public welfare, but it is also planning to incorporate more regulation by the RBI. The RBI is proposing a state-regulated currency system instead of people dealing with cryptocurrencies. Nonetheless, private players in the industry dealing with crypto assets have a fundamental right to carry on with their business.
The draft bill is unreasonable by not only it imposes a ban on the use of cryptocurrencies but also criminalizing it. With imprisonment for up to 10 years, the proposed bill is not a reasonable restriction to fundamental rights. The risks on cryptocurrencies must be analyzed, post which a regulation could be formulated to best mitigate these risks.
[1] Internet and Mobile Assn. of India v RBI, 2020 SCC Online SC 275.
Keywords: New Crypto Bill 2021: An Analysis
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