Supreme Court of India abolishes RBI's circular on Cryptocurrency

In a boost to virtual cryptocurrency and digital assets' industry in India, Honourable Supreme Court of India has abolished the circular of Reserve bank of India (RBI) banning financial services firms from trading or dealing in virtual currency or cryptocurrency.

In Aril 2018, RBI issued a circular on virtual currencies and prohibited financial entities under purview of RBI to deal with virtual currencies (VCs) and to provide services for facilitating any person or entity in dealing with or settling VCs.

These services included maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer/receipt of money in accounts relating to purchase/sale of VCs.

This circular caused banks and financial entities to block all their banking channels to businesses in dealing in virtual cryptocurrencies or digital assets. Few of startup cryptocurrency exchanges even shut down their businesses due to unavailability of banking channels which is important to run any business.

Crypto exchanges who shut their shops in India include Koinex, Cryptokart and Zebpay. However, recently, Zebpay has re-started its operations in India.

A three-judge bench, headed by Justice R F Nariman, Justice Aniruddha Bose and Justice V Ramasubramania, in their Verdict, said, "When the consistent stand of RBI is that they have not banned VCs (virtual currencies) and when the Government of India is unable to take a call despite several committees coming up with several proposals including two draft bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate."

"Therefore, in the light of the above discussion, the petitioners are entitled to succeed and the impugned Circular dated 06-04-2018 is liable to be set aside on the ground of proportionality", reads the 180-page verdict.

Apparently, from the Supreme court of India verdict, it looks like there is no formal ban on Cryptocurrencies in India. Additionally, the Government of India has not yet finalized on regulating cryptocurrencies and digital assets landscape.