SC upholds RBI’s ban on virtual currencies
The Supreme Court on Tuesday refused to stay a Reserve Bank of India (RBI) circular prohibiting banks and financial institutions from dealing in virtual currencies such as Bitcoin.
With no interim stay on the circular, all virtual currency transactions through banks would be blocked from 6 July, effectively resulting in a ban.
A bench comprising Chief Justice Dipak Misra and justices A M Khanwilkar and D Y Chandrachud was hearing a petition filed by the Internet and Mobile Association of India (IAMAI) challenging the April 6 RBI circular that prohibited banking services from dealing in virtual currencies, while giving three months to banks to settle their accounts with such entities or customers.
The apex court issued a notice to RBI while asking it to consider the representations made by the stakeholders in the matter.
Counsel appearing for IAMAI, C A Sundaram sought an extension of the three-month time period given to banks to close the accounts dealing with cryptocurrencies, as the move would be “irreparable” and result in a demonetization-like situation for customers. The association is not opposed to any regulation, Sundaram clarified.
Counsel appearing for RBI, V P Singh objected to the reference to demonetization and said cryp-
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tocurrency was never legal tender and said RBI was examining the representations made by the parties.
RBI has repeatedly through its public notices on December 24, 2013, February 1, 2017 and December 5, 2017, cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies.
“The RBI restriction will kick in from 6 July 2018 as envisaged in the circular. This is a big blow to not only cryptocurrency trading platforms, but also individuals holding cryptocurrency. The choking of banking channels means that virtually all cryptocurrency-related transactions will have to be done in cash or not at all,” said Rashmi Deshpande, associate partner, Khaitan & Co.