The Directorate of Enforcement (ED) is currently handling multiple cases with respect to the crypto businesses that involve money laundering and fraud. Fraudulent initial coin offers, phishing, NFT wash-trading, etc., are rife in the crypto-ecosystem and Indians have been falling prey to both foreign and domestic fraudsters, quite frequently.

The Reserve Bank of India (RBI) had historically opposed the crypto ecosystem and tried to contain its growing threat. In 2020, the RBI failed in its efforts after losing out to the crypto firms in the Supreme Court.

Had the Reserve Bank of India (RBI) won the case, the common people of India may have been spared much heartburn from crypto dealings, and the country would not have incurred huge financial losses from money laundering.

Ironically, the grounds on which the Supreme Court ruled against the RBI may no longer be valid in the wake of multiple crypto-scams and cases of money laundering that are under investigation. If the RBI is dragged to the court again due to similar actions, there are high chances that the apex court may rule in its favour. In fact, this time, crypto-exchanges like WazirX that are, allegedly, partly or wholly owned by foreign entities, may not have the privilege to avail legal recourse, similar to the previous case.

IAMAI Vs RBI Case of 2018

Since 2013, the RBI had been issuing public circulars as warning against digital assets. The growth on public interest in crypto ecosystem and, lack of any regulatory measures initiated by the government, perhaps, prompted the RBI to issue a circular to its subordinate entities, like banks in April 2018, that stated -- the regulated entities are directed not to provide services for facilitating any person or entity in dealing with or settling virtual currencies, aka, cryptocurrencies. This circular, issued on 6th April 2018, had effectively brought the business of crypto-exchanges to a grinding halt in India.

The crypto-exchanges banded together with the Internet And Mobile Association of India (IAMAI) and the latter filed a writ petition against the RBI’s notice in the Supreme Court. A three bench Judgment of the apex court set aside the impugned circular on March 4, 2020, following which the common people of India could transfer fiat money from their bank accounts to invest or trade in cryptocurrencies, NFTs, etc.

SC's 2020 ruling on crypto

RBI lost case, but can win battle against crypto