The man who fought the Crypto Case in India : Interview with Ashim Sood (All Interviews)

Ashim Sood

Interview Date :12th March 2020

Ashim Sood (All Interviews)

An Indian Lawyer and his relation with Japan

I am a lawyer in India, and am dually qualified to practice both in India and in California. However, I primarily practice in India. I am a litigator and fight cases in India’s supreme court and before other Indian courts and international arbitration tribunals. I wouldn’t say that I specialize in cryptocurrency, but new age technology is something which certainly interests me, and litigation issues that are related to it are cases which I am very keen to do. My offices are in New Delhi. We are a small chamber but we do good work.

Ashim Sood

I started working with some Japanese clients who are fantastic to work with. Japan is a country that I am very attached to and I visit it a couple  times a year. It’s a country that I love visiting so much, that I thought I had to find some good reasons to somehow manage to visit Japan after I started practicing my work, so I worked hard to develop clientele there.  I have good Japanese lawyer friends now, including a couple from my days in law school in the US. I love Japanese food, and my friends always take me to a nice Izakaya when I visit. I am even learning Japanese in India, though my level is still too basic to say that I can speak it.  Last year I came with my whole family including my mother, and we spent a lot of time in the whole of Japan.

Big Generational Gap

I don’t think that any lawyer in India is a crypto specialist. I was approached to lead the case in the Supreme Court by a lawyer called Jaideep Reddy from a law firm called Nishith Desai Associates. He knew that I specialize in Supreme Court cases, and also that I had interest in technology related work. He came to me, and explained that they have clients who are cryptocurrency exchanges, and they would like to challenge the RBI, the Reserve Bank of India, whose circular had brought cryptocurrency (especially exchanges) to a standstill in India. The Circular ordered all banks in India to withdraw bank accounts from anyone trading or otherwise dealing with cryptocurrency. 

My first reaction was that it is the Reserve Bank of India that we will have to fight against in this case.The RBI is the right arm of the government and manages the economy and the monetary system here. So, a ban on cryptocurrency by them would really not be something that courts would be keen to review since courts are very careful to second guess an expert regulator on economic matters.  Courts would usually defer to the reserve bank of India’s judgment on an issue like this, specially when a case comes prepackaged with a lot of myths, a lot of fears and biases. I thought that those fears and biases would cause the Supreme Court judges to be a little conservative with all due respect to them.

On one hand, there is a very revered, and highly respected Reserve Bank which says “trust us when it comes to the monetary system” So, when they say when something is bad, then it shall be considered as bad. On the other hand, there are these guys new tech-geeks who are really only saying that “cryptocurrency is not all that bad”. It was really a generational fight in a sense. I did not think that it would be an easy fight, and I remember telling our crypto exchange clients “ The Reserve Bank of India on one side, and on such a niche and largely misunderstood aspect:  the Court probably isn’t really going to listen to us” However, our clients wanted to fight and ultimately we always went to court prepared to do our best for our clients.

“I have burnt my fingers with Crypto before”

We sat down, and we studied the impact of the circular. We realized that we did have some good grounds for a challenge. I also have some experience in cryptocurrency myself. I had been trading it in 2013, but actually lost all of my cryptocurrency because of the exchange that I was trading on suddenly shut down as it was a scam. After that I did not have anything to do with cryptocurrency by what of trading it or holding it etc., though of course I followed its progress out of interest. I am one of the ones who burnt his fingers, but in some senses that made me feel like some bad actors had been giving cryptocurrency a bad name. Even though that’s true for any activity around the world, it was instances like these that the Reserve Bank was really depending on to sway the court. I thought that we should fight that and that’s how it started 2 years ago.

Not having access to bank accounts, its a pure Ban

The circular came in April 2018, and we filed the case in May 2018. The case did not get heard until August 2019 because the court has a long list of cases they have to hear. Until they started hearing it, I don’t think the court thought that this case was a very important case, because they thought that the Reserve Bank had dealt with it already, so obviously they must have done the right thing in regard to cryptocurrency. There was certainly such an approach to the case.

But we had done our homework, we had stayed up long nights, gathered a lot of documents, and studied it a lot. We had to study the law, but also understand the technology deeper. I even watched nearly 20 hours of youtube videos trying to work out the simplest and most effective way to explain blockchain and cryptocurrency to people completely unfamiliar with the concept.

Our bench of Judges understood that all the Reserve Bank of India has done is not allowing anyone who is involved with crypto to be able to open an account. So, they had tried to ban something that even the government of India had not said is illegal. Restricting people from opening bank accounts effectively works as a ban. For an online business who cannot have access to bank accounts, it is a pure ban. You can’t do it in cash, and the court understood that.

We also explained that apart from this ban, there is no other ban on cryptocurrency in India. As a counter argument, the things that the ban was supposedly trying to do were protecting consumers from hacking, speculation, and they wanted to combat money laundering, and terror financing. However, none of those things were actually combated by this ban because people can just take their cryptocurrency off the exchange and trade them peer to peer. In that sense, this ban was making things worse.

Mantra should be ”Regulate, don’t Prohibit”

There is a mix of history to that. In November 2017, the Indian government constituted a committee to look at the precise issues with crypto and the possibility of regulation it. That committee had representatives from high level governments and from ministries from the ministries of finance as well as the Reserve bank of India and the Securities Exchange Commission, and also the main Taxation Authority in India. Around February or March of 2018, the Ministry of Finance was very clear that cryptocurrency should not be banned. They came up with a note that said “We are a country that innovates in technology. Thus, rather than banning it we should try to regulate it” to make sure that nothing bad happens to the people who are using it, and that the ill-effects of crypto should be mitigated. But for some reason 1 month later the Reserve Bank which was a member of that committee brought this ban.

Furthermore, in February of last year 2019 that very committee submitted a report to the government in which it recommended a prohibition on cryptocurrency. Now, that committee report hasn’t been taken forward by government in the sense that there has been no bill brought to the parliament. So, there are 2 ways of looking at that; one is that the government still hasn’t decided, the other one is that because the Reserve Bank of India had effectively banned cryptocurrency, the government didn’t need to decide. Now that the ban has been uplifted, the government will certainly have to take a decision on which way to go. We had been telling the court that the mantra should be ”regulate, don’t prohibit” Prohibition is the most extreme measure in law. This is a very nascent technology with possibilities we don’t understand. Certainly there are risks associated with it, but there are some bad things that happen with every technology, and not even just technology but also with every economic activity; banks get robbed or hacked by online hackers. If you regulate this properly you will mitigate most of the risks that are attached to cryptocurrency. So hopefully the government will see that point of view positively. If another ban comes, we will study it and gear up to challenge that also if it is feasible.

Don’t treat Crypto as an Untouchable Commodity

At the Supreme Court, we actually cited that Malta has a very comprehensive law on setting up crypto exchanges and ICOs etc. Two other laws which we cited at the supreme court were the New York Law and the Wisconsin Law. Apart from this we showed that most democratic and free countries have a regulatory and not a prohibitory approach to cryptocurrency. We explained to the court that ”We are not saying that you should copy these laws, but we are just showing you that countries around the world don’t treat cryptocurrency as an untouchable or pernicious commodity, they treat it as something that you deal with as a normal economic activity”. The other thing in our case is that we showed numerous instances of banks being hacked, even apart from fiat hacks or fiat frauds. We showed the court instances of volatility in the stock markets; there are some stocks which are total scams even when they appear not to be scams. The stock market has fallen all around the world due the COVID-19 pandemic, and so has shown that there is volatility in the stock market as well. There is fraud around the world when it comes to banks, and many scammers around the world are sending people emails, and hack their bank accounts every day. However, the possibility of fraud is not a reason to ban the commodity itself. It is a reason to stop that fraud from taking place. But this was the first time that because of fraud, you ban the commodity rather than making sure that the fraud does not occur. So that’s something that I think even the court found a little hard to digest.

“we won’t reconsider it”

At least exchanges are transparent: they typically want to try and be as law abiding as possible; they keep information about all the trade that is done on their platforms, this information helps de-anonymize a lot of transactions. Hence, the moments you say that these exchanges cannot trade, where most cryptocurrency trades usually take place, you are actually losing a valuable opportunity to monitor law and enforcement issues, consumer issues, speculative issues etc. The court was very open minded, and they heard us for many days in August last year. I think because the court possibly wanted to give the Reserve Bank some deference, they asked the Reserve Bank to reconsider their decision. The Reserve Bank took two month to do so, but came back and said “we won’t change our decision”.

Then the Court heard us again in January for 12 days over a period of about three weeks and they gave us a very patient hearing. I argued the case for about 12 hours out of 18. Finally, we heard our decision about the uplift of the ban about 1 and half month later. It felt really good. We have a very strong cryptocurrency community here in India and people have been following and watching this decision very keenly.

It was satisfying for me as a lawyer also. The court complimented me in the judgment for my arguments, which is very rare, and a great honor for lawyers. It said in the last paragraph of the judgment: “Before drawing the curtains down, we are bound to record, as in every artistic display, our appreciation for the skillful manner in which Shri Ashim Sood, learned Counsel, led the attack on the impugned Circular, but for which, the climax could not have had a nail biting finish.” Only a lawyer will understand that to hear something from the Supreme Court is even more meaningful than winning the case.

There were a lot of people in India following the case, from the industry, and common people who believed in cryptocurrency. The arguments were being live tweeted and I was getting a lot of messages during the case – some people even wanted to send me bitcoin to thank me. After we won, the outpour of joy was very heartwarming, and I felt proud to have fought for this entire community.

The New Generation brings a new Element of Fearlessness

If I was to be a little philosophical about it, I think fundamentally the new generation will bring a new element of fearlessness and innovation to this country. These are young people who have much less to lose, and they live life differently from the previous generations. They look at something and they see a possibility, that even a generation like mine, I am 40 now, would say that people in around our generation look at something new, and they first consider the risks. So, on one end, there is a generation that considers possibilities, and on the other end, there is a generation that considers risk.

One of the things that I told the court was “like any new technology, we don’t understand this technology, but our lack of understanding should not be a reason to shut it down” Every technology takes a life of its own, and in 10 years from now blockchain technology or cryptocurrency could be something very different from what we know it to be right now. I think that there is this young generation who sees these possibilities, so even when they do not see the part ahead clearly, it wants to take risks. I think genuinely to improve the life of others and their own lives, and to see how far we can go with technology. And this is true whether its cryptocurrency, artificial intelligence, or any other invention. India has that spirit, and we are a very young country; over 50% of the population is under the age of 30. So there are many young people with dreams whose parents have grown up in more moderate circumstances. This is the first generation that is interacting with the world openly with full access to all the possibilities that the world has to offer, and they are taking their chances.

There is Excitement but there’s also some Caution

I have already burnt my finger with crypto in the past and I haven’t really invested in anything again after that. So, I haven’t been following the price of bitcoin the last one week, but I have been contacted by a lot of people and it seems to me that there’s a lot of positive sentiment. In the last week, I have been contacted by at least 2 or 3 groups of  people from the US, and some more from India, and these are start-ups; these people who want to start up a crypto exchange or crypto related businesses, and they say they want to come to India and they want to start. So there is a lot of excitement. I think there is a sense of caution, because even though this ban has been lifted doesn’t mean that it can prevent a new ban in a different form. This was a ban by the Reserve Bank of India. However, the government of India itself has been contemplating a lot to ban cryptocurrency. It’s possible that the government may say that instead of banning it, it could be regulated instead due to this time’s judgment. Nevertheless, it’s also possible that the government will react and say “look we don’t like the fact that the Reserve Bank ban is gone, and we want to come back and ban it” So, there is excitement but there’s also some caution.

Single out Crypto for Economic fall is not Correct

I think there were 2 reasons for the financial fall this February to March. One was because of the Corona virus, and the other was the sudden oil price cut putting the market in a chaotic state. But I think that we are at the tip of the iceberg when it comes to what will happen in the next few months. India has suspended all visas issued to everyone in the world, except for diplomats and a few other categories. That means that airlines, hotels, and the domestic tourist industry will wake up today to find that essentially the fittest will survive, and many will not survive in the next 2 or 3 month. What that does to our economy I can’t tell, but all I can say is that these are people who are connected to the fiat economy; they are going to suffer severe shocks, and that’s just the way the world is in the era of globalization: we are all vulnerable, though some more vulnerable sections need more support than others. 

Hypothetically, if this shutdown would continue, it will be catastrophic for the economy. We are talking about a complete shutdown of small retail businesses, and essentially they are the ones who are most affected in India. I think Japan has seen a big rise in tourism as a source of revenue in the recent years, and the Tokyo Olympics is something that a lot of people have invested a lot of money in. Many businesses have invested a lot in order to prepare for the Tokyo Olympics as well. If this market fall does not recover soon, it would be catastrophic, because a lot of businesses start from airlines. If airlines shut down, all their supporting businesses, and hotels will shut down, and there certainly will be unemployment.

There will be ups and there will be downs, but to single out cryptocurrency as being a reason for those ups and downs, or to say that people who invest in cryptocurrency are more vulnerable to those ups and downs is probably not a mature approach. You have to look at it as any other investable commodity. So, like any other investable commodity, in the long run, I think that cryptocurrency will hopefully become a commodity like gold that will become a model and standard commodity whose price will fluctuate, and it will be looked upon as a storage of value all around the world. Crypto prices will go up and down, but with time, the volatility will reduce because the more it becomes integrated with the financial system, the more normalized its price cycles will be. In the end, I think both for the fiat economy and  the crypto economy there is a long way to go, but there will come a time when they will integrate, and sink and swim in the same way.  At the same time, we should consider mitigating risks to retail consumers who are not sophisticated and who could get carried away: the same way this is done for stocks, by regulating brokers, and putting warnings etc.

Stock markets are already crashing, and I think that’s going to be the same situation whether its in India, Japan or anywhere else. I think that it will take years to recover from something like this. In that sense, the lesson we can learn from a cryptocurrency point of view is that the world economy can be decimated without the involvement of cryptocurrency. So, to suggest that cryptocurrency can be a reason, I am not sure if that’s entirely correct to say. However, I am very fearful for the coming days, I think that we all will be affected in some way or another. I wish everyone a safe landing on the other side of this crisis.

Interviewer , Editor : Lina Kamada

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