The world’s biggest democracy stands at crossroads as tensions escalate between the elected and the bankers over, among other things, a fundamental constitutional question: who makes the law?
A central bank diktat issued earlier this year directed banks to stop serving crypto businesses. Without any public consultation, or even prior warning, many crypto businesses in India found themselves without any choice but to shut down.
Practically, thus, the central bank was making law on the matter of money, something all democracies reserve as the exclusive prerogative of the elected sitting in Parliament.
That India’s Central Bank was practically making law is clearly shown by the recent arrest of a bitcoin ATM owner. The police thought cryptos were now illegal.
That’s not the case. Only Parliament can declare something illegal. India’s Parliament has made no such law. Cryptos thus are legal in India because anything that has not been prohibited by a law of Parliament is permitted.
Yet the central bank’s stealthy law making diktat appears to have led to a belief that cryptos are illegal. Showing, in effect, just how much the central bank has usurped Parliament’s prerogative.
This diktat is being challenged in court, where there appears to have been some intervention from the government.
Details are sparse, but it looks like the Indian government is to come out with a policy on cryptos. Thus the court was asked to hold off a decision as the government’s new policy may address it.
However, rather than just policy – which currently as far as the government is concerned is that cryptos are perfectly legal – there’s a far more fundamental question.
Should the Central Bank have the power to effectively make law by directing banks to not serve a perfectly legal industry?
What happens, for example, if the government comes up with a fine framework, or even tries to encourage crypto businesses, while the central bank still keeps its diktat?
Who makes the law in a democracy in financial matters? The elected Parliament or the unelected bankers?
That appears to be the tension according to the media report which says there’s some argument over regulatory jurisdiction.
Meaning there is a constitutional question at the heart of all this. Who makes the law in a democracy? The still sovereign Parliament, or have money matters and our sovereignty over them been sold to bankers?