Author: Jagish Kumar, India
With the Indian Supreme Court forwarding the hearing on cryptocurrency ban by Reserve Bank of India (RBI) to 3 July 2018 from the earlier date of 20 July 2018, it has not given any relief to the petitioner.
The apex court was hearing the matter on the decision by RBI to put a ban on cryptocurrency trading in India from 6 April 2018, and found no merit on why the RBI decision should stay.
On 6 April 2018, a circular by the central bank prohibits banks and financial institutions from providing any service in relation to virtual currencies such as ‘cryptocurrencies’.
Under the circular, entities regulated by the RBI have been barred from “providing any service in relation to virtual currencies, including those of transfer or receipt of money in accounts relating to purchase or sale of virtual currencies”.
The three-judge bench including chief justice Deepak Mishra said that after looking to the request of the crypto industry representative, the court decided to hear the petitioner as the ban will be effective from 6 July 2018.
In its argument, Advocate of Associate Partner at Khaitan & Co representing one of the petitioners said that this is a big blow to not only cryptocurrency trading platforms, but also individuals holding cryptocurrency. The choking of banking channels means that virtually all cryptocurrency-related transactions will have to be done in cash or not at all.
Cryptocurrencies are digital currencies where encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank, the advocate underlined.
Many crypto exchanges have already asked their users to withdraw funds from their account, as it will not be possible after the ban comes into force after 5 July 2018.
Zebpay, one of the biggest digital crypto-exchanges in India in its circular said, “As per a recent RBI action, banks have been told to discontinue banking services to those dealing with virtual currencies. While our industry is challenging this legally, the outcome is beyond our control. Hence, if you are holding any rupees, or depositing any rupees in Zebpay, there could soon come a time when we may be not be able to honour withdrawal requests. Please continue only if you understand this risk.
A couple of cryptocurrency exchanges, including BTCXIndia and Ethexindia, dealing in Ether have already halted their trading since March 2018 due to fears of a crackdown.
However, the bench agreed to hear the postponed petition by the Internet and Mobile Association of India (IMAI) on 20 July 2018.