India’s Supreme Court has upheld the ban which the RBI i.e. the Reserve Bank of India, had put barring lenders from dealing with cryptocurrencies.
The Supreme Court’s Ruling
The court has ruled that the ban which prohibits banks and other financial institutions from offering any services related to cryptocurrencies will stand, which has effectively outlawed cryptocurrencies in the third largest economy in Asia. The institutions had initially been given a three month period during which they were to stop all crypto operations.
The RBI said during the court hearing that Bitcoin could not be accepted as a currency because the existing laws in India only permit coins which are of a physical form, and which are then stamped by the government to be regarded as formal currency. The ministry of finance is yet to make the crypto ban formal.
Going Against The Grain
This step against cryptocurrencies is in contrast to how other economies have reacted to the crypto space. While India is stiff-arming cryptocurrencies and its central bank saying that the ban is cutting off an avenue for crimes through cryptocurrencies, other countries such as South Korea and Malta are taking steps to secure the crypto space as well as facilitate more crypto trading and establishing themselves as blockchain and cryptocurrency hub respectively.
According to Nischal Shetty, the CEO of WazirX, this ruling will not affect India’s exchange as badly as anticipated. He has said that the ban only applies to the direct banking of cryptocurrencies, a facility that crypto exchanges can still operate without. According to him, the buyer and seller of cryptocurrencies are still able to transact with each other while the crypto exchange acts as a central holder for the cryptocurrencies, limiting cheating on both ends while at the same time eliminating banks.
Cryptocurrency Regulation In India
There have been several attempts in regulating cryptocurrencies in India in the past few months. When Bitcoin’s valuation was significantly increasing late last year, the RBI issued an advisory against trading and investing in cryptocurrency. This advisory was backed by the Ministry of Finance, which termed cryptocurrencies a Ponzi scheme.
Earlier this year, Indian banks began stalling payments and withdrawals made to crypto exchanges. Ten days after this began, bitcoin investors in the country received notices which directed them to report the gains they have accrued from crypto trading and pay taxes on them.
Then towards the end of January, it was reported that the Ministry of Corporate Affairs was seeking the advice of ICAI (Institute of Chartered Accountants of India) on the accounting standards possibilities for cryptocurrencies.
During the Parliament’s budget session, the Finance Minister, Arun Jaitely reiterated that India would not accept cryptocurrencies as legal tenders, and added that the government would be taking measures to ensure the elimination of crypto assets use as part of the payments system. His utterances caused panic among many people who construed them as a confirmation that the government would be banning crypto trading. He, however, clarified, on a later date, that the government had no plans of banning bitcoin.