Supreme Court refuses to overturn Central Bank of India ban

The Supreme Court is scheduled to hear the case against the Central Bank of India (RBI) circular on July 20, but has agreed to hold an early hearing on July 3 on a separate petition by the Internet and Mobile Association of India (IAMAI), of which cryptocurrency exchanges are members.

Much to the regret of the plaintiff and the entire community, the Supreme Court on Tuesday refused to overturn the RBI decision prohibiting banks and other financial institutions from partnering with or providing financial services to companies transacting in Bitcoin, Ethereum and other types of cryptocurrencies. The hearing on the class action will take place as scheduled on July 20.

In addition, four more similar petitions have been filed in the Delhi High Court and the Supreme Court of India.

At the previous hearing on May 17, the Supreme Court recommended that marketplaces provide detailed reports on its activities and compliance with financial regulations, which were provided in early June. At a hearing on July 3, the Supreme Court ordered the central bank to comment on the submission within seven days.

In its April 5 statement, the RBI expressed concern about the risks that cryptocurrency assets pose to consumers by compromising market integrity and facilitating money laundering. “Taking into account the risks associated with cryptocurrency, it has been decided to prohibit RBI regulated companies from providing services to any individual or entity carrying out cryptocurrency activities or transactions in cryptocurrency. Banks and other financial institutions must cease all business dealings with digital exchanges by July 5,” the statement said.

The regulator’s decision also comes as some cryptocurrency companies deal in more than a thousand different digital currencies, which the government and RBI say have no intrinsic value and therefore pose a risk to investors. By taking this decision, RBI intends to protect companies from the above-mentioned risks. Since December 2013, the RBI has issued four warnings on bitcoin and other types of cryptocurrencies.

Until now, investors bought and sold digital currencies through exchanges for rupees. After July 5th, all banks and other regulated companies will cease providing services to cryptocurrency exchanges, leaving their users with very limited alternative trading options..

Following the publication of the circular dated April 5, some cryptocurrency exchanges, such as WazirX and Koinex Loop, began operating using a peer-to-peer model to carry out trading without using banking channels. However, many leading digital trading platforms, disappointed with the RBI decision, have asked customers to withdraw money from their cryptocurrency wallets.

Last week, one of India's largest cryptocurrency exchanges Zebpay asked its users to withdraw all funds before the July 5 deadline. 

«Although we are challenging this ban, we do not know what the court's decision will be. Therefore, if you have rupees or if you are depositing rupees on Zebpay, you have to withdraw them before July 5, after which date it will not be possible to do so."

Additionally, the central government is already drafting a law to regulate digital currency-related activities in India. In an interview on ET Now last month, Economic Affairs Secretary Subhesh Chandra Garg said that a draft policy on digital currencies has been prepared and can be considered already in July.

According to businesstoday.in