Cryptocurrency bill and challenges

Cryptocurrency bill and challenges

Context: The Internet and Mobile Association of India (IAMAI) has claimed that the secrecy shrouds proposed Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.

Concept:

About cryptocurrency

• Cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers.Ex- Bitcoin and Ethereum

Additional info

• IAMAI said that the draft bill hardly saw any effort towards consultation.
• The law is proposed for existing laws to deal with cryptos are inadequate.
• It plans to introduce a law banning trade in all cryptocurrencies — except for those issued by the government itself
• In 2018, the Reserve Bank of India (RBI) had issued a circular banning the provision of banking services to any entity using cryptocurrencies (it was indirectly an end to all crypto exchanges functioning in the country)
• The Supreme Court (Internet and Mobile Association of India vs RBI), however, struck the circular down on grounds of proportionality.
• The Doctrine of Proportionality entails that any public authority must maintain a sense of proportion between the goal it wants to achieve and the means it employs to achieve it.
• The S C Garg Committee on cryptocurrencies had earlier raised various concerns around such assets, holding the same view of a blanket ban. Among the issues raised was that cryptos do not have any of the benefits of fiat currency; and that they have a degree of pseudo anonymity.

Challenging the ban constitutionally and otherwise

• The current challenge to the bill is also on ground of doctrine of proportionality.
• Right to trade in cryptos under Article 19 of the Constitution, which was recognised in the IAMAI case
• the right to property, especially since the apex court has previously recognised crypto assets as “intangible property”
• Challenge to right to free speech and expression (as US courts have previously said that the encryption software in its source code form must be protected by the First Amendment)
• Arbitrariness of decision by banning it violates right to equality under art 14. Ex- In creating a Central Bank Digital Currency and banning all others, the Centre may be accused of being arbitrary
• Differentiation between public and private cryptos is vague and confusing
• value-transfer role does not mean it has to be a fiat currency, such as in the case of gold or even a loyalty points system, which can coexist with other legal tender.
• Pseudo anonumity also does not hold as law enforcement has been successfully able to trace offenders by analysing blockchain and de-anonymizing transactions.

About fiat money

• Fiat money is government-issued currency that is not backed by a physical commodity, such as gold or silver, but rather by the government that issued it.