In Internet and Mobile Association of India v. Reserve Bank of India, decided on 4 March 2020, a three-judge bench of the Supreme Court set aside the RBI's 6 April 2018 circular that had cut crypto businesses off from the banking system. The Court accepted that the RBI has the power to regulate in this area, but held that a total banking cut-off was disproportionate, because the RBI had not shown that crypto activity had harmed the entities it regulates.
The judgment reopened banking for crypto businesses in India. It did not make crypto official currency, and it did not create a regulatory framework. That's the summary. Below is what the case was about, how proportionality works in plain words, and one detail from inside the case that I've never forgotten: the moment the judges asked to see a human.
The short answer
- Case: Internet and Mobile Association of India v. Reserve Bank of India.
- Decided: 4 March 2020, by a three-judge bench of the Supreme Court.
- Challenged: the RBI circular of 6 April 2018.
- Result: circular set aside on proportionality grounds. Banks could serve crypto businesses again.
- Not decided: official currency status, or any regulatory framework for crypto.
What the case was about
On 6 April 2018, the RBI directed the banks and other entities it regulates not to deal in virtual currencies or provide services to anyone dealing in or settling them, and to exit existing relationships within three months. For Indian exchanges, that meant losing access to rupee banking.
The Internet and Mobile Association of India challenged the circular in the Supreme Court, and other petitioners and crypto businesses joined the challenge. Unocoin was part of the case. The question in front of the Court was not whether crypto should be regulated. It was whether cutting an entire lawful business off from banking was a proportionate response, when no harm to regulated entities had been shown.
Why the bench asked for a human
This is the part only someone inside the case can tell you.
The challenge rested in part on fundamental rights, including the right to carry on a trade or business. Late in the case, in the final weeks and months, the judges made a point I still think about. In substance they said: you are arguing that rights were violated, so show us a human whose rights were violated, not just companies and associations made up of companies.
My co-founder Harish was the individual petitioner. He was put under the microscope. Our business was looked at closely, through him, as a real person running a real company that had been cut off from banking.
I still tell this story, because it says something important about how courts see these cases. A circular affects industries on paper. A court wants to see the person on the other end. When Harish stood in for that person, the case stopped being abstract.
All three judges ruled in the industry's favour. As I understand it, it was only about the second time in India's history that the Supreme Court had overruled the RBI in this way. We're proud of that, and of Harish and Sathvik, who decided in 2018 to fight rather than leave.
Proportionality, in plain words
Proportionality is a test courts use when the state restricts a right. In general terms, it asks a few questions:
- Is there a legitimate goal? Here, the RBI's concern about risks to the financial system.
- Is the measure connected to that goal?
- Is it the least restrictive way to get there, or is there a gentler option?
- Does the harm the measure causes outweigh the benefit it delivers?
The Court accepted the first point: the RBI does have the power to regulate in this area. But it found the measure failed the test, because the RBI could not show that crypto activity had harmed the entities it regulates. Without that harm, cutting an entire business off from banking went too far.
That distinction matters. The judgment didn't say the RBI was powerless. It said this particular measure, in these circumstances, was out of proportion.
What the judgment did not do
This is where a lot of online summaries get it wrong.
- It didn't make Bitcoin official currency. Bitcoin is not official currency in India.
- It didn't create a regulatory framework. There was no new crypto law from the judgment.
- It didn't stop future rules. The rules that followed came through tax and anti-money-laundering law: a flat 30% tax on VDA gains and 1% TDS under the Finance Act 2022, and PMLA coverage for VDA service providers from March 2023.
What it did was remove the banking cut-off, so Indian crypto businesses could operate through the normal banking system again.
The timeline around the case
The judgment makes more sense when you see where it sits.
- December 2013: Unocoin launches in Bangalore. A couple of weeks later, the RBI posts a public notice warning about the risks of virtual currencies.
- A few years later: a similar RBI warning to the public comes a second time.
- 6 April 2018: the RBI circular directs regulated entities to stop serving crypto businesses, with three months to exit.
- 2018 to 2020: the challenge is heard in the Supreme Court. Exchanges operate without normal banking. At Unocoin, we lay off about a hundred people to survive.
- 4 March 2020: the circular is set aside.
- 2022: the Finance Act 2022 brings the 30% tax on VDA gains and 1% TDS.
- March 2023: VDA service providers come under the PMLA and must register with FIU-IND.
Why this case matters beyond crypto
I'm not a lawyer, and I won't pretend the judgment is simple. But as a founder, the lesson I took from it is one I'd give to anyone building something new in India.
Institutions can act against a new industry before they understand it. When that happens, the answer isn't to leave or to go around the rules. It's to make the case, in public, with evidence, and let the system do its job. In our case, the system worked. A three-judge bench looked at the facts, asked to see a real person, and decided the measure went too far.
That's also why we put the sources on our site instead of asking anyone to take our word for it.
What it means for you today
For someone in India thinking about Bitcoin today, the judgment's practical meaning is simple. Buying, holding and selling Bitcoin is not banned. Crypto is taxed. Platforms must register with FIU-IND under the PMLA. Unocoin is registered with FIU-IND as a reporting entity under the PMLA.
And crypto products remain unregulated in India and can be highly risky. There may be no regulatory recourse for any loss. The judgment protected a business's access to banking. It doesn't protect anyone's investment.
If you'd like the full sequence, from the 2018 circular to the 2020 judgment and the rules that came after, with links to the original documents, our Supreme Court page lays it out. And if you want the story from the 2013 launch onward, it's in the story section on our home page.
Common questions
What was decided in IAMAI v RBI?
A three-judge bench of the Supreme Court set aside the RBI's 6 April 2018 circular that had stopped banks and other regulated entities from serving crypto businesses. The Court accepted the RBI's power to regulate but held the measure disproportionate, because harm to regulated entities had not been shown.
When was the judgment?
4 March 2020.
Did the judgment make Bitcoin official currency?
No. It did not make crypto official currency and did not create a regulatory framework. It removed the banking cut-off. Tax rules came with the Finance Act 2022 and anti-money-laundering coverage in March 2023.
Who were the petitioners?
The lead petitioner was the Internet and Mobile Association of India. Other petitioners and crypto businesses joined the challenge. Unocoin was part of the case, and its co-founder Harish was an individual petitioner.