Challenging a ban on crypto through Writ/PIL

UKprod

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Quote from: raghavrkamath on June 01, 2021, 12:37:44 AM

This is a well researched post. Further, in India, the Apex bank had accepted such ruling by the courts and recently had said that earlier notification on Crypto currency wherein it had curbed the use of Crypto assets, now stand squashed. Considering the impact such legal decisions had, as rightly mentioned by you, it is need of the hour to consider such remedy against any unfavorable rules issued by Government.

Thank you, for your kind words. Yes, it is true that it is need of the hour to first educate the government on the uses of cryptocurrency and not just ban it out of xenophobia. However, if the ban is implemented, then it would a colossal legal fights against the ban by the government. I'm sure a lot of organizations will get together to fight out the legal battle similar to what happened in India when RBI imposed a ban.

I've written on the facts of the Crypto ban in India in a more detailed manner in this thread: https://bitcointalksearch.org/topic/guide-on-crypto-banprohibition-in-india-so-far-only-facts-and-press-releases-5339221

raghavrkamath

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Quote from: UKprod on May 01, 2021, 01:56:34 AM

Hi everyone! This is my post on how crypto users can challenge a ban on crypto imposed by their government and obtain a favorable result against the same. I have kept this post to cover maximum number of jurisdictions, so that it helps crypto communities across the globe should their government impose an outright ban on crypto. Further, I kept legal jargons to the minimum, for ease of reading.

This is a well researched post. Further, in India, the Apex bank had accepted such ruling by the courts and recently had said that earlier notification on Crypto currency wherein it had curbed the use of Crypto assets, now stand squashed. Considering the impact such legal decisions had, as rightly mentioned by you, it is need of the hour to consider such remedy against any unfavorable rules issued by Government.

Ryker1

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Well, I would agree that money laundering regardless of any type of transactions being used will always be there. It is the criminals we have to stop from doing it and not the instruments they used as people also use it for good. People can always launder money not just in cryptocurrency. A simple software as a service would be the best option they would have if they want to do some money laundering --and not cryptocurrency. Taxes must always there, but people are only scared of paying taxes because they thought that they had to pay taxes even when they did not have any gains. This has to be cleared and we are all set up.

Theb

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Quote from: Theb on May 02, 2021, 02:07:54 PM

~snip

When the ban of cryptocurrency as a legal tender in some country,it will reflected the price of bitcoin.Some government first ban the cryptocurrency then legalised the cryptocurrency to get some tax from that.Because by legalize,you need to pay tax to the government.Then the government also monitor the flow of money to the cryptocurrency in their country.

Legalization doesn't automatically leads to additional taxes being generated or at least its the only reason why as from what I have seen there are no special kind of tax for cryptocurrencies alone but they often fall to an existing category which is mostly capital gains tax as legally they are classified as "assets" for them to not have additional precedent on having 2 or more legal tenders in their country. If cryptocurrency has been legalized it only means that they know themselves that they are left out and they are just missing an opportunity compared to the other countries who have accepted them earlier as they are missing out a blooming industry/market as well.

UKprod

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Quote from: noorman0 on May 04, 2021, 08:48:53 AM

Some methods of money laundering that are difficult to track and disguise include the use of bitcoin mixers and NFT products. Centralized exchanges also do not apply KYC for small balances, it is possible for players to accumulate large amounts through small withdrawals from these exchanges.

Thank you for your comments. Yes, I totally agree that money can be laundered by use of mixers and NFTs as well. However, a ban on cryptocurrencies in itself won't stop any criminal from using crypto as a means of money laundering. Such criminals will continue to use crypto even if it is banned because implementing a ban is 1000x more difficult than introducing a ban.

Further, regarding KYC, as far as my experience goes, most reputed centralized exchanges do not allow any purchase of cryptocurrencies without the minimal KYC norms. Hence, these exchanges will have information on the user and of the transactions undertaken by the user. Once such data is available with them, they can track the aggregate of the transactions throughout a period and thereby identify large movement of crypto/cash. Government can then regulate the exchanges, requiring them to mandatorily share this information with them. Thereby, Government can track money laundering through crypto.

I hope this addresses the points you raised. Thank you again for your inputs. I would like to take up a separate post providing how Government can regulate the cryptocurrencies, also considering how few of the governments have already implemented these laws.

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Quote from: UKprod on May 03, 2021, 12:57:31 PM

Money laundering: While it is true that cryptocurrencies can be used easily for money laundering, it must be noted that flow of currencies from one wallet to another can be traced easily in most blockchains. Hence, the flow of money can be traced in most cases at one point or another. Irrespective of this, where a person is found to be laundering money using cryptocurrencies, they need to be tried under the Money Laundering Act, rather than banning cryptocurrencies. The governments have a wrong notion that banning cryptocurrencies would stop money laundering through cryptocurrencies. For a criminal who is rogue enough to launder money, would a simple ban on cryptocurrencies stop them from using cryptocurrencies?

Keeping this aside, what government can do is, make it compulsory to route any cryptocurrency transaction through an exchange and with mandatory reporting of the reason for the transaction in cryptocurrencies. This would help government regulate cryptocurrency in the country.

Some methods of money laundering that are difficult to track and disguise include the use of bitcoin mixers and NFT products. Centralized exchanges also do not apply KYC for small balances, it is possible for players to accumulate large amounts through small withdrawals from these exchanges.

UKprod

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Quote from: hugeblack on May 02, 2021, 06:34:07 AM

Most countries have laws related to money laundering or foreign exchange management, ...

Thank you for your inputs in relation to this post. Regarding your comments, I have thought through and jotted down the below points to the best of my knowledge:

Money laundering: While it is true that cryptocurrencies can be used easily for money laundering, it must be noted that flow of currencies from one wallet to another can be traced easily in most blockchains. Hence, the flow of money can be traced in most cases at one point or another. Irrespective of this, where a person is found to be laundering money using cryptocurrencies, they need to be tried under the Money Laundering Act, rather than banning cryptocurrencies. The governments have a wrong notion that banning cryptocurrencies would stop money laundering through cryptocurrencies. For a criminal who is rogue enough to launder money, would a simple ban on cryptocurrencies stop them from using cryptocurrencies?

Keeping this aside, what government can do is, make it compulsory to route any cryptocurrency transaction through an exchange and with mandatory reporting of the reason for the transaction in cryptocurrencies. This would help government regulate cryptocurrency in the country.
Taxation: While tax is huge pain in the butt, as a law abiding citizen, it is necessary to pay taxes on any gain in cryptocurrency
Trading cryptocurrencies: In this regard, as stated above government can regulate the cryptocurrency exchanges, make it mandatory to route every cryptocurrency transactions (even if it is for trading) through an exchange and instruct exchanges to collect the information for each cryptocurrency transaction. In this regard, it may be difficult to tackle Foreign exchange regulations, but with specific thresholds and frequent monitoring this could be managed as well. For eg. government could make it mandatory for exchanges to do a due diligence on a cryptocurrency before it is listed on their exchange.

I will be incorporating the above points into my original post wherever suitable. Thank you again for your valuable points.

Theb

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The hard thing about pursuing a legal remedy for a reversal on a ban in cryptocurrencies is they always find a way to overturn things as well as the citizens being faced by the government where they can have the best lawyers depending the law they have created. Just like what the RBI did regarding the Supreme Courts ruling about them prohibiting banks to not entertain crypto related transactions they still manage to find a way on creating a ban for the whole crypto industry. That is why for me legal remedies when it comes to bans like this has a slim chance of happening and for me the best thing to do is to wait and hope that their own government change their minds about this things. Biggest example here is why Marijuana even though it has been proven scientifically that it isn't harmful is still illegal in a lot of countries while we know that there are several groups in that country opposing their laws about it.

krypki

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I would second your point on ignorance of the Indian government in identifying the potential of crypto and NFTs in various use cases. To begin with, there is sufficient ambiguity in the definition of cryptocurrency as provided in the act. Quoting the definition as stated in the act- “any information or code or number or token not being part of any Official Digital Currency, generated through cryptographic means or otherwise, providing a digital representation of value which is exchanged with or without consideration, with the promise or representation of having inherent value in any business activity which may involve risk of loss or an expectation of profits or income, or functions as a store of value or a unit of account…” Going by this definition, not just crypto currencies and NFTs, but several in-app tokens and coins could also be under scrutiny.

hugeblack

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Most countries have laws related to money laundering or foreign exchange management, according to which people are arrested. Hence, the matter moves from the right to engage in trade to sabotage the economy or support dark activities.

those who are targeted by governments are either individuals who are active in transferring between fiat and crypto or platforms, and therefore you will most likely not be in trouble if you HODLING your coins (you may have to pay taxes.)

What you mentioned is good but will not apply to converting or trading cryptocurrencies.

UKprod

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Quote from: teosanru on May 01, 2021, 03:24:34 PM

A really good post, Appreciate your efforts and research on this topic and if you see ....

Thank you for kind words and your inputs. These are my baby steps towards creating a strong legal case for cryptocurrencies and your inputs are valuable to creating this.

I would like to address a few points to the best of my ability and knowledge:

Controlling of liquidity of the currency: Yes, governments are also concerned about controlling the flow of crypto, interest rates on the same, etc. In respect of this issue, government can address it in other means, rather than on outright ban. For example, government can regulate the use of crypto, require crypto to be maintained only with exchanges, take explicit approval of central bank for major use cases, mandatory conversion of crypto to domestic currencies where the value of such crypto exceeds certain threshold, etc. While these are rough ideas, governments could research on each option to derive an optimum solution to the issue, other than banning crypto. I would like to create a separate post for these alternatives with more detailed analysis around each option.
Challenging a law created by Parliament/Senate: Yes, it is true that challenging a law created by Parliament/Senate could be extremely difficult. In this regard, I believe that petitioners would need to highlight before the court that the Parliament/Senate has passed the law with partial facts at hand and has not deep dived into understanding the repercussion of the Law. However, this would be very fact specific. For example, in India, the inter-ministerial committee in its report on cryptocurrencies has failed to identify various use cases and functions of crypto such as NFTs on which digital art thrives, charity such as the www.cryptorelief.in which is working towards oxygen supply during the ongoing COVID-19 crisis etc. Hence, it would be essential to highlight the ignorance of the legislature while passing the law, which would provide the court with a valid reason to provide relief in this regard. I am writing an article on this for my firm and if possible I would be sharing certain insights from the article on this forum.

I have incorporated essentials points in relation to the above into my original post now, to make it very comprehensive. Once again, thank you for your inputs.

PS: On a separate note, I do hope www.cryptorelief.in takes good measures during the current crisis and saves maximum lives and makes the whole crypto community proud.

teosanru

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A really good post, Appreciate your efforts and research on this topic and if you see most of the PILs in different coutnries these only were the arguements raised by various attorneys. But I still think you won't be able to make a good case. Right to Freedom of profession theory doesn't work here because this thing does pose a threat to the central government system of Economics. I would state what RBI in India said against this appeal. They said the problem isn't demeaning of domestic currency or a Threat to forex Reserves. The problem is the control of liquidity. If a lot of people start to transact in cryptocurrencies government will not be able to do its basic activities of Credit Control in the country. In high Inflation times, the government tries to cut down inflation by reducing the interest rates or pumping in lesser money in the system. But this mechanism will fail if people move to an alternative mode of currency for transactions.

Moreover I think if the ban direction is from some central bank or through a notification from government this case can be fought but if Parliament/ Senate creates a law to ban cryptos chances of winning that case are pretty less.

UKprod

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Hi everyone! This is my post on how crypto users can challenge a ban on crypto imposed by their government and obtain a favorable result against the same. I have kept this post to cover maximum number of jurisdictions, so that it helps crypto communities across the globe should their government impose an outright ban on crypto. Further, I kept legal jargons to the minimum, for ease of reading.

Legal ground to be taken:

The substance of this legal ground relies on the "Right to constitutional remedies" and "Freedom to carry out trade or practice a profession" being provided in the constitution. Hence, kindly verify if your country provides these rights. Most democratic countries provide these rights.
Under the freedom to carry out trade or profession, any person can carry a trade/profession if it does not pose a threat to the government or other people. If the trade/profession has the potential to earn revenue, carrying out such trade should be allowed with full freedom. Now when it comes to trade/profession, the crypto economy has been supporting a number of lives that are solely/largely dependent upon crypto income. In addition to the core crypto participants such as miners, traders, etc., crypto is widely used by digital artists selling NFT, bloggers, musicians, etc. Hence, ban on crypto is equivalent of restricting the freedom to carry out trade and profession.
Once it is established that use of crypto is one of the basic fundamental rights, the next step would be to invoke right to constitutional remedies whereby a person can file a petition before a court either as a writ petition or public interest litigation/petition (as applicable in your country) for violation of their fundamental rights by the government through such ban on crypto. In such cases, if the person petitioning is able to prove before the court that ban on crypto is essentially violating the constitutional rights, then the court would order a rollback of such ban

Fact specific ground to be taken:

India: The Indian inter-ministerial committee in its report on cryptocurrencies has failed to identify various use cases and functions of crypto such as NFTs on which digital art thrives, charity such as the www.cryptorelief.in which is working towards oxygen supply during the ongoing COVID-19 crisis etc. Hence, it would be essential to highlight the ignorance of the legislature while passing the law, which would provide the court with a valid reason to provide relief in this regard.

Possible arguments by government and how to counter those:

Threat to domestic currency and economics: Governments have always worried about crypto replacing their sovereign currency. Further, another area of concern for the governments is that if crypto is used as legal tender, it will face a difficulty in regulating the flow of currency, interest rates etc. In such cases, the governments are welcome to ban the 'use of crypto as legal tender', but not outright ban the crypto. In logical terms this can be explained as 'killing with a knife' has to be made illegal and merely 'using a knife' cannot be made illegal since it can be used for a lot of productive purposes. Thereafter, the government can look into classifying crypto as an asset and regulate exchange of assets.
Threat to foreign exchange reserves: Most governments would perceive a risk of loosing their foreign exchange reserves due to investments flowing into crypto and thereby creating decrease in value of their own currency. However, this can be countered by providing details of how people stand to gain by carrying out their trade and profession through crypto and how it would in reality be a source of earning foreign exchange reserves
Used for illegal activities: Another concern raised by governments, is that crypto is used for illegal activities such as extortion, kidnapping, ransomwares, etc. However, the argument to be taken here is that use of crypto for such activities can continue even if cryptocurrencies are banned in a country and a ban is likely not able to stop it, since there are various means of carrying out such activities. Further, similar to the logic explained above, "use of crypto in illegal activities" needs to be banned and not mere "use of crypto".
Can be used for money laundering: One more concern of the government is that it can be used easily for money laundering, it must be noted that flow of currencies from one wallet to another can be traced easily in most blockchains. Hence, the flow of money can be traced in most cases at one point or another. Irrespective of this, where a person is found to be laundering money using cryptocurrencies, they need to be tried under the Money Laundering Act, rather than banning cryptocurrencies. The governments have a wrong notion that banning cryptocurrencies would stop money laundering through cryptocurrencies. For someone who is rogue enough to launder money, would a simple ban on cryptocurrencies stop them? Hence, banning crypto currencies is not the solution.

I hope this is useful. Do let me know in case you come across any other additional legal grounds that can be taken. I will be happy to incorporate the same in this post so that this can be used as a single reference point by everyone.

Further, do let me know the fact specific grounds that can be taken for your country and I would be pleased to incorporate it into my post. Thank you.

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