Supreme Court ends RBI’s 2018 ban on banks dealing in cryptocurrency
In April 5, 2018, RBI issued a press release stating that virtual currencies (VCs), referred to as crypto currencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering
The Supreme Court on Wednesday ended a 2018 ban on banks from dealing in virtual currencies such as cryptocurrencies including bitcoins. A three-judge bench led by Justice Rohinton Nariman quashed the Reserve Bank of India notification issued in April 2018 that had introduced the restriction.
The central bank’s decision had been challenged by the industry grouping Internet and Mobile Association of India (IMAI), which questioned the RBI’s powers to impose the ban since cryptocurrencies weren’t a “currency” in the legal sense of the term. Instead, the IMAI had insisted that cryptocurrencies were more in the nature of a commodity.
In its arguments before the bench also comprising justices Aniruddha Bose and V Ramasubramanian, the central bank had underscored that it had treated cryptocurrency as a digital means of payment that had to be nipped in the bud so that the country’s payment system is not jeopardised.
In this context, the RBI had referred to the many occasions when it had cautioned users of cryptocurrencies about the virtual currency.
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In December 2013, for instance, the RBI cautioned users, holders and traders of virtual currencies, including Bitcoins, about the potential financial, legal and security related risks associated with it.
On 5 April 2018, the banking regulator went a step ahead and declared that banks shall not deal with the crypto-related businesses and entities regulated by the RBI should stop providing such services. It cited concerns of consumer protection, market integrity and money laundering around virtual currencies, also referred to as crypto currencies and crypto assets.
A day later, the RBI had issued the formal notification stating that entities regulated by it shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs.