While responding to a petition filed by the Internet and Mobile Association of India, Supreme Court on March 4, 2020 has set aside the RBI Circular notified on April 6 2018 restricting Crypto-currency (virtual currency-VC) transactions by banks and financial entities. The Court’ s ruling on RBI circular as not based on proper studies and without citing evidences on how VCs “actually impacted entities regulated by RBI” , in fact, glosses over many fundamental questions connected with crypto-currencies, even as the RBI has only “ring-fenced” banks and financial entities from crypto associated risks such as terror financing, money laundering, etc.
The SC judgement assumes added significance especially in view of a February 2019 proposal by the Inter-Ministerial Committee for a ban on private crypto-currencies through a legislation called “Banning of Crypto-currency and Regulation of Official Digital Currency Act”. This proposal came in the context of the global concern arising from the destabilising power of crypto operators.
No doubt, when crypto-currencies like Bitcoin first emerged during 2008-09 , the central banks and govts the world over first ignored them, then they mocked them, next they fought them and now they are trying to build their own VCs by harnessing the power of digitisation. The reason is obvious. Crypto-currencies or VCs such as Bitcoins (whose very purpose of creation was to erode the power of central banks) under the control of private parties that cross national borders today are capable of undermining not only financial stability and global trade but also have far-reaching implications pertaining to the entire economic management of countries.
For instance, the value of a Bitcoin in 2010 was 0.09 dollar. But, within a span of just 6 years, it got a 10000-fold appreciation in its value such that in 2016, 1 Bitcoin was equal to 900 dollars. That is, one who purchased 1 million dollar worth Bitcoins in 2010 would have an accumulated wealth of 10000 million dollars in 2016! And, by December, 2017, the value of a Bitcoin was reported to have reached the staggering figure of 19783.06 dollar—a clear illustration of the horrific money-spinning power of VCs to create a “bubble” capable of sucking out real wealth through sheer speculation.
The 2018 RBI Circular aimed at regimenting VCs followed by the 2019 Inter-Ministerial Committee Proposal for banning crypto operations by private digital spectators are to be viewed in this context. And in all these, the Modi govt which, under its Digital India and Cashless Payments programs as dictated by global digital giants, has been acting perfectly in tune with imperialist regimes.
For instance, today there are two trends associated with VCs. The first is the effort for the creation of a transnational form of VC encompassing the dollar, euro, yen, etc. on the part of corporate digital MNCs. The initiative on the part of Facebook to put forward “Libra” as a transnational VC is an example. Against this, various countries, especially US and China, today are engaged in a cut-throat competition to create their own versions of VCs. The aim of this second option is to create a central bank digital currency (CBDC) under the control of respective govts who can also control cross-border movement of money along with its traceability.
Regarding this, 18 countries including India are engaged in developing their own CBDCs. On account of differences within the US ruling regime, the initiative on the part of Federal Reserve to develop the dollar as a VC is rather slow. However, China is leading the race here with the imminent possibility of a digital Yuan. The Chinese initiative has sharpened inter-imperialist rivalries as manifested in US, Japan, Canada and EU active in the field of developing their own digital currencies using Blockchain technology, as a counterweight to China. And if China accelerates its efforts to launch the digital Yuan much before US giant Facebook’s announcement of “Libra”, new contradictions may arise even as many well-meaning people in US are against Libra due to concerns of privacy, freedom and accountability. Meanwhile, serious initiatives towards VCs are going on in EU also.
Given this international volatile situation pertaining to cryptocurrencies, and in view of the global concerns and complexities involved, the Supreme Court of India’s March 4 judgement freeing trade in them seems very intriguing! n