Supreme Court of India has finally lifted the ban on cryptocurrency trading in India, while rejecting previous directions given by the Central bank of India i.e. Reserve Bank of India (RBI). The RBI had prohibited banks and financial institutions from offering crypto-related services through a circular in April 2018.

 The decision of the Supreme Court has been considered as a historical judgment that has generated a euphoria among the crypt community in India.

A common Petition was filed under the banner of Internet and Mobile Association of India (IAMAI), on behalf of several crypto-related businesses and public litigations against the RBI’s restriction on offering the bank services to the crypto-businesses back in April 2018.

A bench of three judges was hearing the case which was headed by Justice RF Nariman and included Justice Aniruddha Bose and V. Ramasubramanian as the member judges. While reading the verdict the bench stated, “We have allowed the writ petition.”

Legal Battle between RBI and Internet and Mobile Association of India (IAMAI)

In April 2018, RBI had directed all the financial regulators including the banks to not provide services to businesses dealing in cryptocurrencies. The decision was supposedly taken to minimize the risks of money laundering and financial fraud.

The RBI then had released a prohibitory statement which stated, “In view of the associated risks it has been decided that with immediate effect entities regulated by RBI shall not deal with or provide services any individual or business entities delete with or settling VCs.”

Following this decision, in July 2019, a government panel had recommended a ban on cryptocurrencies usage and trading and a jail term up to 10 years with heavy penalties, for dealing with cryptocurrencies.

The panel also had prepared a report and drafted a bill then which was supposed to be presented in the parliament in January 2020 after the evaluation from financial authorities and government. The panel had even suggested the government launch a government-supported digital currency in India.

The RBI order was challenged by a plea by the Internet and Mobile Association of India (IAMAI), against the ban on cryptocurrency.

 IAMAI had been arguing that crypto assets are not a currency but they fall under commodity and the RBI does not have the powers to ban them without any legislation.

RBI was defending that right from 2013, it has been issuing a precautionary warning to the cryptocurrency users not to use crypto assets as a medium for payment to avoid financial risks.

 How the verdict will affect the Indian Economy?

The crypt community in India had rejoiced over the verdict of the Supreme Court. Experts believe that this decision will escalate the crypto industry in India and will boost the gloomy economy and will create massive job opportunities.  

Jayashree Ingle

CBW - External Analyst

INDIA