The Supreme Court on Wednesday set aside the complete ban on cryptocurrency imposed by the Reserve Bank of India. The RBI had decided to ban banks from providing services to people or businesses dealing with cryptocurrencies.
The apex court allowed a plea challenging RBI's 2018 circular that barred banks from trading in cryptocurrencies. A three-judge Bench of Justice Rohinton Fali Nariman, Justice S Ravindra Bhat and Justice V Ramasubramanian allowed the plea of the Internet and Mobile Association of India (IAMAI) challenging the order.
The IAMAI had argued during the hearing that cryptocurrency is not strictly currency and is more in the nature of commodity, as mentioned in a report in Bar and Bench. RBI does not have powers to impose such a ban in the absence of a law in that regard, argued the association. Trade of VCs was legal within the ambit of the Constitution, it said. The IAMAI also stated that if cryptocurrency is banned then it would be removed from the formal economy but give rise to the same through black market transactions, as mentioned in the report.
RBI had argued that it had been cautioning VC users that it considers cryptocurrencies a mode of digital payment. It argued that the use of cryptocurrencies had to be curbed so that it does not jeopardise the payment system. It stated that it was, hence, empowered to ban cryptocurrencies.
The RBI issued a press release on April 5, 2018 stating that the cryptocurrencies raised concerns of consumer protection, market integrity and money laundering. The central bank then issued an order the following day asking entities regulated by it barring them not to deal with cryptocurrencies. "Such services include 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 (virtual currencies)", the notification had stated.