After quite a fight, on Wednesday 4th March 2020, the Supreme Court rejected the Reserve Bank of India (RBI) ban posted on cryptocurrency-related business. The previous circular by the Reserve Bank of India (RBI) restricted banks and financial institutions from making any association with any business or entity dealing in cryptocurrency.
The circular being released on April 6, 2018, that resulted in businesses dealing in cryptocurrencies such as Bitcoin, being almost crushed out of Indian markets by stopping their regular interface with banking sectors. Many businesses collapsed after this circular was brought in action and those who still managed to survive soon changed their business model to peer-to-peer or P2P transactions for the time being.
This circular had many loopholes to be faced with criticism, as according to Article 19(1)(g) of the Indian Constitution, it allows individuals or organizations the freedom to practice and carry-out any trade, business or occupation. The ban was not imposed in accordance with any law in India, and there was nothing wrong found by the banking regulator in the way these companies function.
In a historic judgment, the Supreme Court verdict welcomed cryptocurrency exchanges to India with open arms. This removal of the ban is said to open doors for new opportunities in the Indian markets, especially in terms of investment, market maturation, financial inclusion, and even economic growth.
Previously, RBI expressed their concern over a few notable factors like consumer protection, money laundering, and market integrity, eventually asking banks to refrain from dealing with crypto-related businesses due to the potential risks assumed by RBI only. A day after the circular was issued by RBI preventing entities under the bank not dealing in virtual currencies.
The decision met with challenge soon after by Internet and Mobile Association of India (IMAI), questioning RBI’s power to ban cryptocurrency by other financial institutions, emphasizing on the fact that these virtual currencies are not actual ‘currency’ in a legal sense, and was only similar to commodities, thus RBI is no longer entitled to regulate them.
There are several instances that show RBI warning Indian consumers from using cryptocurrencies fearing potential risk. With the conflict of considering cryptocurrencies as commodity or currency, which led the court to put its faith on regulators treating VCs in foreign jurisdictions and foreign laws.
Though VCs around the world are not recognized as legal tender, yet it provides a medium of exchange. Though not recognized as a legal tender; but due to having almost the same value and functions to that of the real currency, RBI technically gets the authority over banning VCs.
However, violating Article 19(1)(g) despite no actual law by the Parliament prohibiting cryptocurrencies cannot be considered as an option. On the contrary, these enterprises can provide an important alternative at a time when the modern economy almost blindly depends on digital currencies.
The ban had affected VC exchanges badly when the ban was first imposed as these sectors only mean of survival was only focused on banks and financial institutions. RBI had restricted VCs in order to protect and safeguard the payment system of the time. With the ban gone these cryptocurrency businesses are free to once again try and cement their positions in the Indian market.