NEW DELHI: The Supreme Court on Wednesday set aside Reserve Bank of India’s order prohibiting banks from offering services for cryptocurrencies, terming such a blanket ban “bad in law”.
RBI had through a circular dated April 6, 2018, barred entities regulated by the central bank from providing any service in relation to virtual currencies, including transfer or receipt of money in accounts in connection with the purchase or sale of virtual currencies.
The Internet and Mobile Association of India (IMAI) had moved the SC against the RBI diktat.
On July 3, 2018, the top court had sought a response from RBI and the Union ministries of finance and information and technology on IMAI’s plea.
A three-judge bench headed by Justice R F Nariman found the complete prohibition was disproportionate to the objectives sought to be achieved by the apex banking regulator.
“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 said in its 180-page verdict.
In its circular, the banking regulator had said the prohibition was to protect entities from “activities that pose reputational and financial risks along with other legal and operational risks”.
RBI had also said there were risks of terror financing and money laundering through cryptocurrencies.
‘RBI banned crypto on moral grounds’
IMAI had argued RBI had banned cryptocurrencies “on moral grounds” since no prior studies were conducted to analyse the effect of the virtual currencies on the economy and the blanket ban was “arbitrary, unconstitutional and unfair”.
“Till date, RBI has not come out with a stand that any of the entities regulated by it namely, the nationalised banks/scheduled commercial banks/cooperative banks/NBFCs has suffered any loss or adverse effect directly or indirectly, on account of the interface that the VC exchanges had with any of them,” the judgment said.
Earlier, a finance ministry appointed inter-ministerial panel had come up with a draft bill seeking to ban private crypto-currencies and suggesting that the government consider launching its own cryptocurrency.
Crypto traders feel the road is not yet cleared as much will depend on how the government and RBI go ahead with this ruling.
“Move will give birth to a lot of start-ups in India,” said Zac Cheah, CEO, Pundi X.
RBI ban on‘moral grounds’
IMAI argued in SC that RBI banned cryptocurrencies “on moral grounds” since no prior studies were conducted to analyse the effect of virtual currencies on the economy