The Hon’ble Supreme Court of India in the case of Internet Mobile Association v. Reserve Bank of India (hereinafter, “Cryptocurrency Judgement”) set aside a Circular issued by the Reserve Bank of India (hereinafter, “RBI”) which prescribed the financial entities regulated by the RBI to cut their association and discontinue to provide their services to entities and individuals which trade in virtual currencies. The rationale of the court for striking down the said circular was the non-satisfaction of the test of proportionality which was further backed by the omission by the RBI to show any actual harm or loss occurred due to the interaction between regulated financial entities and the entities dealing in virtual currencies. This paper argues that while the decision of the apex court to strike down the RBI circular is plausible, there are some incongruities in the application of the test of least intrusive measures as applied by the court. The paper also highlights the necessity of defining virtual currency and creating an effective regulatory framework for crypto assets in India. It suggests certain essential parameters on which the omphalos of virtual currency regulation in India can be nurtured. 

Key Words: Virtual Currency, Blockchain Law, Test of Proportionality, AMLD5.

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