India’s Supreme Court Asks Central Government to Clarify Its Stance on Cryptocurrencies Within 2 Weeks

Siamak Masnavi

On Thursday (25 October 2018), the Supreme Court of India asked the government to state its opinion on cryptocurrencies within two weeks. The Supreme Court was hearing several petitions, by Indian crypto exchanges, challenging the order issued by India's central bank, the Reserve Bank of India (RBI), on 6 Aril 2018.

That circular, titled "Prohibition on dealing in Virtual Currencies (VCs)", stated:

"2. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. 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. 3. Regulated entities which already provide such services shall exit the relationship within three months from the date of this circular."

According to the India Law Journal, the consequence of this notification by the RBI was that multiple petitions were filed in various courts by Indian crypto exchanges (such as Coindelta, Koinex, and Throughbit), which were eventually bundled together by the Supreme Court, which heard the matter on 3 July 2018, and decided to deny stay of execution of RBI's notification.

Although there is no official ban on trading of cryptocurrencies in India, the RBI discourages this type of activity. According a report by local news outlet "The Economic Times", at the October 25th hearing, Nakul Dewan, the counsel for the nine crypto exchanges challenging the RBI's notification, said that the RBI order had "virtually stopped all trade and exchange of bitcoins." Dewan added that the government had to "give some finality to the issue" since there were jobs at stake.

As for RBI counsel Shyam Divan, he told the court that "the banking regulator was only trying to discourage the use of cryptocurrencies and that it was essentially a policy decision, on which the government must take a call."

The next motion hearing on this matter will be held on 20 November 2018.

The RBI ban (on bank accounts for for individuals or businesses engaged in crypto-related transactions) has caused major headaches for India's crypto exchanges, forcing most of them to to try stay float either via crypto-to-crypto trading or by accounting as escrow account holders in peer-to-peer (P2P) crypto trading. Following Thursday's hearing, the founder and CEO of crypto exchange WazirXNischal Shetty, tweeted:

And when asked if he thought thst the RBI ban would be overturned, he replied:

And yesterday, the National Association of Software and Services Companies (NASSCOM), which is a trade association of Indian Information Technology and Business Process Outsourcing industry, issued a statement to clarify its position on cryptocurrencies following the publiction of various reports saying that it had said that cryptocurrencies were illegal in India:

 

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