The Supreme Court had banned cryptocurrency trading in April 2018. The Reserve Bank of India (RBI) had imposed the ban that stopped banks and financial institutions from providing any services related to cryptocurrencies. However, the Supreme Court has now overturned its stand.
RBI stated that the latest move is necessary to overcome the boundaries and to uplift the country’s financial system. On the other hand, the Central Bank mentioned that Bitcoin and other virtual currencies could not be treated as usual currency as they are not physically present, nor are they stamped by the government.
The RBI issued a notice in 2018, which created panic to several startups that offer cryptocurrency-related services. Many petitioners, along with the internet and Mobile Association of India were against the circular. They argued that India must be in par with the other countries and allow the trading of cryptocurrencies. As a result, the bench, headed by Justice Rohinton F. Nariman, overruled the RBI’s circular with the reason of disproportionality.
Further, the 180-page verdict reveals that it is not aligned with the assumption of the industry. RBI’s prohibition measure was not in proportion to the threat. Also, the verdict concluded that the RBI did not submit any empirical data to examine alternate methods.
The Supreme Court specified that there is no law banning virtual currencies yet and therefore, can stand until such a law is in place. Also, cryptocurrencies were referred to as a by-product of blockchain technology and pronounced that the two must be treated as separate entities. A more progressive approach to blockchains in India is expected to take shape soon.
For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in
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