Indian court upholds RBI ban on cryptocurrency exchanges
A ruling by India’s highest court of law has refused to grant any temporary respite against the central bank’s ban on banking services to cryptocurrency exchanges.
The Supreme Court’s decision means the deadline set by the Reserve Bank of India (RBI) on April 5, for banks to wind up any existing banking relationships with virtual currency exchanges and traders within three months, will take effect from this Thursday.
The RBI also mandated banks to stop allowing their own retail clients from purchasing cryptocurrencies through their banking accounts.
Reacting to the RBI crackdown, several of India’s cryptocurrency exchanges approached the Supreme Court in April and the following month the court set July 20 – two weeks after the ban takes effect – as the next date for hearing the case.
However, the Internet and Mobile Association of India (IAMAI), whose membership includes several bitcoin exchanges, then lobbied for an early hearing, which was brought forward to today (July 3).
Not the end of the story
Responding to the Supreme Court’s latest ruling, Rashmi Deshpande, associate partner at law firm Khaitan & Co, said: “This a win for the RBI and a big blow to virtual currency exchanges and traders.” His firm represents Kali Digital Eco-Systems, an Indian exchange planning to begin operations later this year.
“In our earlier request to the RBI as well, we had asked it to extend the deadline by a month after the July 20 hearing,” Deshpande added. “However, now that the ban will continue, the banking route for the exchanges and its users will be completely choked.”
However, although the court’s upholding of the ban is a setback, India’s exchanges are hopeful that Narendra Modi’s government might prove more accommodating. Ministers are in the final stages of finalising draft regulation on bitcoin and other currencies, according to a senior government official.
“We have prepared a draft that entails what parts of these businesses should be banned and what should be preserved,” Subhash Chandra Garg, secretary in the department of economic affairs, who heads a committee on cryptocurrency regulation, said last month. “This should be discussed by the first week of July and we should wrap this up within the first fortnight.”
Meanwhile, attention will turn to the Supreme Court’s next hearing on July 20 of the crypto industry’s case against the RBI ban.