Crypto Ban In India Will Remain, Says Supreme Court

News, Regulation | July 4, 2018 By:

The Indian Supreme Court has declined to overturn the Reserve Bank of India’s (RBI) ban on banks dealing in cryptocurrencies.

In April this year, the RBI directed all banks to wind up any existing banking relationships with crypto exchanges and traders within three months, with a July 6 deadline. The blockade prompted local crypto exchanges to file petitions that eventually reached the Indian Supreme Court, which barred all high courts from accepting petitions relating to the issue. In May, the Supreme Court set the next date for the hearing on the case to July 20, two weeks after the ban would come into force. However, the date was later changed to July 3 after the Internet and Mobile Association of India (IAMAI), which counts crypto exchanges as its members, requested an early hearing.

During the hearing, the Indian Supreme Court, led by Chief Justice Dipak Misra, said that the RBI’s prohibition on providing services to crypto companies will “remain implemented.” The central bank told the top court during the hearing that bitcoin and other cryptocurrencies cannot be treated as currency under India’s existing law, which mandates coins made of metal or exist in physical form and stamped by the government.

“This a win for the RBI and a big blow to virtual currency exchanges and traders,” said Rashmi Deshpande, associate partner at Khaitan & Co, a law firm representing Kali Digital Eco-Systems. “In our earlier request to the RBI, we asked it to extend the deadline by a month after the July 20 hearing. However, now that the ban will continue, the banking route for the exchanges and its users will be completely choked.”

Despite the Supreme Court upholding the ban, some exchanges remain optimistic about India’s future in cryptocurrency. Last month, Subhash Chandra Garg, India’s Economic Affairs Secretary, said that the government will be releasing a draft related to cryptocurrency this month.

“We are fairly close to developing a kind of template which we think might be in the best interest to our country,” Garg said. “We have prepared a kind of draft that we intend to discuss with the committee members in the first week of July. We actually moved quite a lot in that, what part of this business should be banned, what should be reserved, and what not. That kind of detail work has happened, and now we should be in a position to wrap that up in the first fortnight of July.”