India’s Supreme Court Upholds Banking Ban on Cryptocurrency Exchanges
India’s Supreme Court on Tuesday upheld the central bank’s edict barring cryptocurrency exchanges from doing business with regulated financial institutions.
Banking Ban Upheld
In a decision led by Chief Justice Dipak Misra, India’s highest court upheld the RBI’s ban on lenders from dealing with digital currency exchanges and their users. The decision effectively outlaws cryptocurrency transactions in the world’s fastest-growing economy at a time when many in the industry believed more liberal regulations were coming.
Financial institutions have just two more days to comply with the central bank’s ruling, which was delivered on Apr. 6. Under the new guidelines, financial institutions are forbidden from dealing with digital currency exchanges directly and must also prevent retail customers from purchasing cryptocurrencies through their bank accounts.
Several exchanges petitioned the courts to challenge the ban, arguing that the new policy is “arbitrary, unfair and unconstitutional.” Others have argued that the ban is misguided given the central bank’s lack of direction on cryptocurrencies. This was further corroborated by a request for information submitted to the RBI back in April. In that request, central bankers admitted they had no guidance and conducted no research in deciding on their new policy.
The Supreme Court hearing was originally scheduled to take place on July 20 but the matter was expedited for reasons that aren’t entirely clear.
New Crypto Laws Coming?
Although the Supreme Court ruling is considered a major blow to India’s nascent cryptocurrency industry, there’s strong reason to believe that a new regulatory framework is coming.
As Hacked reported last week, a central bank sub-committee on cryptocurrency has finalized a new draft bill on how to best regulate the digital currency market. This was confirmed last month by Department of Economic Affairs secretary Subash Chandra Garg. According to Garg, a new draft bill will be presented to lawmakers in the first week of July.
“We are fairly close to developing a template that we think is in the best interests of the country,” Garg said in a televised interview with India’s largest financial media outlet.
He added the following:
“We’ve actually moved quite a lot [in drafting regulations] in that, what part of the [cryptocurrency] business should be banned, what should be preserved and what not. That kind of detailed work has happened.
Despite the Supreme Court ruling, India’s digital currency players are betting that the blanket ban will eventually be reversed and that exchanges will be allowed to operate with clearer guidance. Their optimism is based in part on the Indian sub-committee’s belief that a blanket ban on cryptocurrency transactions is not appropriate. In the meantime, market participants are converting rupees into cryptocurrencies in preparation for the ban.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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