The Supreme Court on Wednesday revoked a Reserve Bank of India ban on trading in cryptocurrencies. The top bank had imposed the ban in 2018. A three-judge bench of the Supreme Court called the bank’s ban “disproportionate”, Business Standard reported.
The judgement came in response to a petition filed by the Internet and Mobile Association of India, a not-for-profit industry body. The petition said the RBI had banned the virtual currencies only on moral grounds since no prior studies were conducted to analyse the effect of these virtual currencies on the economy. It said the RBI lacked the jurisdiction to place such a blanket ban, and that it had imposed it under an erroneous assumption that it was not possible to regulate virtual currencies. It called the ban “arbitrary, unfair and unconstitutional”, News18 reported.
In its response, the central bank said that there is no blanket ban on cryptocurrencies, only a ban on trading in them for entities it regulates. The RBI said the prohibition was imposed to protect entities from “activities that pose reputational and financial risks along with other legal and operational risks”. It also flagged risks of terror financing and money laundering through cryptocurrencies.
The central bank’s 2018 circular had said that the entities it regulates are prohibited from providing any service in relation to virtual currencies. The prohibition extended to transfer or receipt of money in accounts relating to the purchase or sale of virtual currencies.