Domestic cryptocurrency space is hustling again, the Reserve Bank of India has cited that banks cannot refer to April 2018 as it was struck down by Supreme Court in 2020. But a week ago, it sent out directives to major Indian banks to stop dealing in cryptocurrencies. Following which, major banks including HDFC Bank and State Bank of India came down on cryptocurrency exchanges in India and flagged off cryptocurrency transactions across exchanges stating permanent closure of accounts as well as curbs on account transactions. This plummeted Cryptocurrencies to their annual lowest including Bitcoin, Ethereum and Bitcoin Cash. Clampdown panice triggered traders to sell their holdings.
On the Regulatory side RBI has kept banks and crypto rooters on toes.. With banks directed to review and evaluate accounts dealing with cryptocurrency transactions, it led banks including ICICI Bank, HDFC Bank and SBI to discontinue their payment gateway services across all major cryptocurrency exchanges in the country. Soon thereafter, avolatile month came with some regulatory respite from the RBI invalidating 2018 Circular quashed by the Supreme Court in response to Internet and Mobile Associate of India (IAMAI) petition.
But definitely, this is a clarificatory position regarding applicability of the 2019 Ban Circular, the issues RBI raised on Cryptocurrency independence, remain.
There is a haze and theCryptocurrency and Regulation of Official Digital Currency Bill, 2021 is in the green room of the parliament.
It may well be a moment of optimism, to believe that the Regulator is considering India open for Crypto business. The 2018 ban restrained entities from dealing in virtual currencies and provide services like maintaining records, registering, trading, settling, clearing giving loans against virtual tokens or accepting virtual tokens as collateral. Empowered under Sections 35A, 36(1)(a) and 56 of the Banking Regulation Act, 1949, RBI directed the restraint.
IAMAI representing various cryptocurrency exchanges filed a petition in the Supreme Court against this RBI ban.
It argued, banning legitimate business activity including trading in cryptocurrencies is unconstitutional in nature and the RBI isn’t empowered to deny access to banking channels to carry out these legitimate businesses.
RBI’s defence, it has been consistent in its opposition towards payment portals undermining the integrity of the banking system by endorsing alternative currency system. Wihtout imposing a formal ban on cryptocurrency under any particular legislation, RBI always issued various public notices citing various risks associated with trading and mining of cryptocurrencies. The Supreme Court strike down in 2020 allows trading and mining of cryptocurrencies including Bitcoins.
The directive to banks to stop dealing in cryptocurrencies, which caused Banks to withdraw their crypto payment gateways and a subsequent endorsement by RBI that the ban is not applicable since it was lifted by the SC in 2020- Keeping the space engaging, and miners, hopefu!
SOURCES:
- https://rbi.org.in/Scripts/NotificationUser.aspx?Id=11243
- https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12103&Mode=0
- https://www.moneycontrol.com/news/business/analysis-has-rbi-really-endorsed-crypto-transactions-in-india-6966971.html
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Source Credits: Economic Times Bloomberg, Money Control