Court rejects RBI ban on crypto biz

THE TOP COURT HELD THAT THE BAN BY RBI WAS VIOLATIVE OF FREEDOM TO CARRY ON TRADE GUARANTEED BY ARTICLE 19(1)(G) OF THE CONSTITUTION

NEWDELHI: In a significant verdict in favour of cryptocurrency -related businesses, the Supreme Court on Wednesday quashed an April 6, 2018 circular of the Reserve Bank of India (RBI) banning banks and financial institutions from providing services to any individual or business entities dealing with or settling cryptocurrencies, including Bitcoin.

The central bank’s decision, a virtual ban, almost killed these companies and the sector by disconnecting their lifeline, namely the interface with the regular banking sector. Some managed to change their business models (into so-called peer-to-peer or P2P transactions, for instance), but many died.

The top court held that the ban by RBI, despite the banking regulator not finding anything wrong about the manner in which these cryptocurrency companies were functioning and despite the fact that they had not been banned by any law in India, was violative of freedom to carry on trade guaranteed by Article 19(1)(g) of the Constitution and was wholly disproportionate to the object sought to be achieved.

“When the consistent stand of RBI is that they have not banned VCS (virtual currencies) and when the Government of India is unable to take a call despite several committees coming up with several proposals including two draft bills, both of which advocated exactly opposite positions, it is not possible for us to hold that the impugned measure is proportionate”, the bench headed by justice Rohinton Nariman ruled.

Cryptocurrency exchanges welcomed the verdict of the top court. “The removal of the ban by the Supreme Court is going to open new opportunities for India in terms of investments, economic growth, financial inclusion, and market maturation,” said Sumit Gupta, co-founder and CEO of COINDCX.