Big day for blockchain enthusiasts and cryptocurrency-entrepreneurs in India. In a massive verdict, The Supreme Court of India has lifted the 'cryptocurrency or other digital assets trading ban' imposed by Reserve Bank Of India in 2018. In a 2018 circular, the Reserve Bank of India (RBI) had banned all VCs, including Bitcoin, in the country and stated it does not consider them 'legal tender'.
The supreme court calls the RBI ban as unconstitutional.
The Supreme Court on March 4 has lifted the complete ban on cryptocurrencies, it will likely come as a big relief to virtual currency (VC) proponents in the country. The ruling marks a turning point for the Indian crypto ecosystem, which had been operating under a cloud of uncertainty for nearly two years.
While quashing the complete ban on cryptocurrencies, the SC declared RBI's circular as 'unreasonable and disproportionate'. It has also set aside the RBI's ban on banks' dealing with cryptocurrencies. The court essentially agreed with petitioners that the central bank had overreached by restricting access to banking services for crypto businesses without demonstrating that these entities were causing tangible harm to the financial system.
The apex court termed that RBI circular, dated April 6, 2018, as unconstitutional. The RBI had in an affidavit in January told the SC it "had not banned cryptocurrencies, but only ring-fenced regulated entities from associated risks."
The affidavit was filed against a petition filed by the Internet and Mobile Association of India (IAMAI), which argued that the RBI ban violated the fundamental right to carry on trade and business under Article 19(1)(g) of the Indian Constitution.
Meanwhile, Bitcoin, the world's largest cryptocurrency, on February 12 surged past $10,000 mark once again to touch a fresh high for CY20. It was trading at $8,821.07 at 11.05 am. The broader crypto market has been on an upward trajectory, and the Indian ruling adds another layer of optimism for the sector globally.
The government had constituted an inter-ministerial committee in 2017 under the chairmanship of secretary, economic affairs, with Secy (MeiTY), Chairman (SEBI) and deputy governor, RBI as members, to study the issues related to virtual currencies and propose specific action to be taken in this matter.
The draft of Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019 proposes 10-year jail for those who "mine, generate, hold, sell, transfer, dispose of, issue or deal in cryptocurrencies directly or indirectly." That draft bill, however, has not been introduced in Parliament, and the Supreme Court's ruling now complicates the government's path forward significantly.
In April 2018, the RBI gave a three-month notice to the banking sector to stop their involvement in any sort of cryptocurrency transactions and thousands of crypto-traders India faced a setback. The impact was immediate and devastating for the nascent industry.
In September 2018, India's largest cryptocurrency exchange Zebpay shut down after the Reserve Bank of India (RBI) had imposed an apparent ban on virtual currencies. Zebpay, founded in 2014, was primarily responsible for introducing cryptocurrency trading to thousands of people in India. The exchange had been processing millions of dollars in daily volume before the ban forced it to cease operations entirely.
Unocoin, another leading cryptocurrency trading platform in India, was laying off the majority of its staff amid regulatory uncertainty. The Bengaluru-based startup reportedly scaled down its team to merely 14 employees in April from over 100 people in February 2018. The damage was not limited to these two exchanges. Several other startups in the blockchain and crypto space either relocated overseas or pivoted entirely to survive the regulatory clampdown.
While the world has found renewed interest in cryptocurrencies after Facebook announced its cryptocurrency project Libra, the company ruled out an entry in India, with sources saying it would not be available in countries where cryptocurrencies are banned. That position may now shift, as the Supreme Court's decision opens the door for global crypto projects to reconsider their India strategies.
