- The Supreme Court of India has lifted the Reserve Bank of India’s circular that directed banks to refrain from any cryptocurrency transactions.
- The three-judge bench called the directive “unconstitutional”.
- The judgement will make it easier for cryptocurrency exchanges to operate in the country and open the gates for international players to enter the market.
The Supreme Court of India today (March 4) quashed an order by the Reserve Bank of India (RBI) that had banned banks from trading in cryptocurrency in 2018. The apex court called RBI’s move “unconstitutional” and has lifted the ban.
Indian banks can now deal in digital currency, which will make it easier for people to trade on cryptocurrency exchanges. Till now, although exchanges weren’t banned, the limitation on banks made it difficult for them to operate. While the RBI did not move to control cryptocurrency, it had directed banks not to aid it, on whom it has dominion over.
After the 2018 ban, Internet and Mobile Association of India (IAMAI) filed a case against RBI’s move. The SC bench allowed the petition on the grounds of proportionality. IAMAI argued that crypto isn’t a ‘currency’, it’s an instrument — a financial instrument that should be treated like “casino chips”.
The judgement could open up the gates for companies like Ripple to enter the Indian market. “You know, typically you’d say India would be high on our list. India hasn’t yet provided a lot of clarity from a regulatory point of view and so we have no prioritised,” said Ripple CEO Brad Garlinghouse during an interview with CNN last month.
The argument to legalise cryptocurrency in India
Ashim Sood, who argued on behalf of IAMAI, said that even though the RBI has the power to regulate monetary policy, it doesn’t empower it to ban cryptocurrency, as per a Crypto Kanoon report.
He also pointed out that since cryptocurrency should be treated like any other financial commodity, akin to gold or silver. This means that even though they aren’t an actual currency, they still store value.
So, if crypto can’t become another parallel currency — it doesn’t pose a threat to India’s sovereignty.
Sood acknowledged that cryptocurrency exchanges are vulnerable to getting hacked. Last year, the Japanese exchange BITPoint was hacked for $30 million and another exchange, Binance, lost $40 million. Sood argues the risk can be managed by placing new regulations that could plug up holes in the system, which is what Japan did after its exchange was hacked.
As with any currency, cryptocurrency can be used for money laundering and terror financing. But Sood said that possibility can easily be shrunk if digital money is subject to the same rules as SWIFT transactions in banks.
“There is no doubt that cryptocurrencies are not only the future of money, but that they are already having a major impact in the world of mainstream finance in the present,” said Nigel Green, founder and CEO of deVere — an independent financial consultancy — at the Delta Summit last year.
See also:
Top cryptocurrency scams of 2019 — and how most hackers got away with it