India’s supreme court ruled on Wednesday to allow banks to re-enable transactions for cryptocurrency traders and exchanges, quashing the RBI circular that banned such dealings. This judgment is a major blow for the thriving industry. Markets are already soaring up and Bitcoin prices are expected to reach its original charm once again.
The Reserve Bank of India in April 2018 ordered banks and financial institutions to stop providing banking services to exchanges and individuals dealing in virtual currencies.
At the time, RBI clarified that the move was necessary to curb “ring-fencing” of the country’s financial system and Bitcoin cannot be treated as currencies as they do not exist in physical form and have no intrinsic value.
Due to this radical approach, a lot of crypto exchanges like Koinex was forced to halt operations. A lot of foreign exchanges also terminated operations as India has the highest number of cryptocurrency traders and the ban affected the market all around the world.
In the ruling today, the bench, headed by Justice Rohinton F Nariman, overruled central bank’s circular on the grounds of disproportionality.
“Investments had stopped and start-ups were staying away from starting a business in the crypto and blockchain space in India which will change now that the Supreme Court has said that the RBI circular was unconstitutional,” said Nischal Shetty, CEO of WazirX, an Indian cryptocurrency exchange.
Trade body Internet and Mobile Association of India (IAMAI) along with a group of petitioners challenged the central bank’s circular arguing that India should look at most other nations allowing cryptocurrency trading. A lot of nations have moved to launch their own virtual currencies.
Reserve Bank of India defended in the Supreme Court saying that it had always been consistent in its opposition to allowing any alternate payment systems and undermining the integrity of the banking system. It argued that although there was no formal ban on cryptocurrencies under any law in India, it had consistently been warning all those dealing in these currencies of the risk inherent in them.
However, the industry may still face issues as a government panel is appointed to look into the matter and it recommends that India should ban all private cryptocurrencies. In July, the panel also recommended a jail term of up to 10 years for anyone dealing in virtual currencies. The government is yet to draft regulations around cryptocurrencies.