A recent ruling by the Indian Supreme Court reversed a ban on crypto trading in the country, imposed by the central bank nearly two years ago. A three-judge bench, led by Justice Rohinton Fali Nariman, overturned the ban.
The Crypto Ban
In 2018, the Reserve Bank of India (RBI) issued a directive that barred banks operating in the country from dealing in cryptocurrencies. At the time, the bank expressed concerns over money laundering, consumer protection, market integrity, amongst other factors. This essentially rendered the cryptocurrency sector in India dead. Startups and companies offering crypto trading services were locked out of the banking sector, which made it impossible for them to operate. Consequently, most of them decided to shut down their operations with others choosing to move their business abroad.
The RBI ban was imposed after months of scrutiny by various financial regulators in the country. Besides that, the national parliament held discussions on crypto. After a lot of research, government institutions decided that cryptocurrencies were nothing more than Ponzi schemes. At one point, the Indian parliament contemplated imposing a complete ban on handling or possession of cryptocurrency. This was one of several harsh regulations that were being considered. However, the RBI decided that instead of banning crypto, it would ban Indian banks from facilitating “any service in relation to virtual currencies.”
The Legal Battle
Without being able to access Indian banks, crypto firms and exchanges in the country could no longer continue to function. It became too complex to operate in India without breaking the law, and crypto exchanges shut down. What followed was a legal battle that has lasted nearly two years. The goal was to have the ban imposed on banks lifted.
While the central bank saw crypto as a huge deal, the India crypto market was quite small. For instance, despite having a population of over a billion people, India accounted for about 3% of all crypto trading globally. However, the hype around crypto and the rate at which the sector was growing spooked regulators and the central bank.
The petition to have the ban reversed was filed by various crypto businesses under the umbrella of the Internet and Mobile Association of India (IAMAI). During the proceedings, the IMAI argued that crypto was more of a commodity than a currency. Therefore, the central bank did not have the jurisdiction to impose such a ban.
The central bank countered this statement by explaining it had a right over the sector since it considered cryptocurrencies to be a digital means of making payments. As a result, crypto needed to be stopped before it upended the country’s payment system. Besides that, it argued it had legal jurisdiction to impose the ban. At the time the central bank imposed the ban, it gave Indian banks three months to end all dealings in the crypto sector. The RBI argued that this was an important step in curbing the ring-fencing of the country’s financial system.
The IMAI underlined that no damage had been done to the country’s financial sector by crypto trading. According to the association, the ban was disproportionate to the alleged threat posed by crypto. Besides that, it highlighted the fact that some countries around the world were considering adopting national digital currencies.
The Future of Crypto Trading
Financial experts in the crypto sector view this as a positive move for the industry with many of them describing the Supreme Court’s verdict as “historic”. They believe that since most of the infrastructure for crypto trading in the country has already been built, the sector will start seeing a lot of activity really soon.
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