by Elton Gomes
The Supreme Court (SC) of India has refused to grant interim relief to cryptocurrency trading, upholding the Reserve Bank of India’s (RBI) circular banning virtual currencies.
A bench comprising Chief Justice Dipak Misra and justices A.M. Khanwilkar and D.Y. Chandrachud, issued notices to the ministries of Finance, Law and Justice, Information Technology, and the RBI. Earlier, the SC had sought to club all cases related to cryptocurrencies and had said that an order would be passed on July 20. However, the date was preponed on the request of the Internet and Mobile Association of India.
This effectively means that all banks in India have to discontinue all services dealing with virtual currencies.
Rashmi Deshpande, an advocate and associate partner at Khaitan & Co, said, “The RBI restriction will kick in from July 6, 2018, as envisaged in the circular. This is a big blow to not only cryptocurrency trading platforms, but also individuals holding cryptocurrency,” the Economic Times reported. Deshpande added that the restriction on banking channels means that all cryptocurrency-related transactions will have to be conducted with cash or will have to be cancelled completely.
Here’s what happened
On April 5, the RBI barred banks and other financial institutions from dealing in cryptocurrencies. “In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs (virtual currencies),” India’s apex bank said in an official statement, as reported by the Economic Times.
The report further stated that banks will be disallowed from the sale or purchase of cryptocurrencies. This meant that investors would be unable to transfer money from their bank accounts to crypto-trading wallets like Zebpay, Koinex, Unocoin, Coinsecure, and others. After the crackdown, it was certain that India’s crypto exchanges would be affected. It was estimated that 50 lakh Indians would bear the brunt of the ban.
The RBI’s deputy governor B.P. Kanungo told the media that the apex bank has given three months to banks to unwind their positions with entities related to cryptocurrencies.
Crypto investors and exchangers are searching for solutions as the ban goes into effect from July 6. Nischal Shetty, founder and CEO, WazirX India, a crypto exchange, said that his firm is working towards building a P2P platform that will allow buyers and sellers to transact among themselves.
“When someone wants to buy, she will get the account details where the amount will have to be transferred. We will secure the crypto asset from the seller and once the transfer of funds is confirmed, the asset will be released to the buyer,” Shetty told Live Mint. In the meantime, cryptocurrency experts are urging investors with a short-term horizon to liquidate their assets while they have time.
In view of the ban, Zebpay has already disabled the deposit and withdrawal options for Indian Rupee accounts from its platform. In June, the crypto exchange company told its users to withdraw their fiat funds from the company. The company further warned them that trading against the Indian Rupee could stop on all exchanges if the Supreme Court’s ruling does not favour them.
Although the crypto crackdown will affect investors and traders, there might be some positive news. Abhishek Rastogi, partner at Khaitan and Co, said that the Supreme Court’s verdict does not mean that the value of cyptocurrencies possessed sinks down to zero. For example, a customer can still purchase a television from a showroom that accepts cryptocurrencies as payments.
Suresh Sadagopan, founder of Ladder7 Financial Advisories, emphasised that cryptocurrencies had its warning signs, and that investing in cryptocurrency was an “insane option.” Insane option or not, crypto traders and investors are certain to feel the heat amidst the RBI crackdown.
Elton Gomes is a staff writer at Qrius.