Opinion | A judgement that balances power and proportionality

In a judgement on Wednesday spanning elements as diverse as Vedic philosophy and cypherpunks, Jain parables and the history of central banking, the Supreme Court set aside a circular issued by the Reserve Bank of India (RBI) banning entities regulated by it from dealing in virtual currencies. Rich with details on the character of virtual currencies and their manner of regulation, as also the power and role of RBI, the judgement provides learnings on proportionality in regulatory response and governance. The top court acknowledged RBI’s pre-emptive as well as reactive powers to regulate virtual currencies, but held that such powers should be exercised by demonstrating the harm sought to be addressed or mitigated through its action.

The judgement has set the stage for RBI to recalibrate its policy response towards the regulation of virtual currencies in a way so as to address potential consumer protection issues and systemic financial stability issues, as well as cybersecurity issues.