SC reserves order on RBI’s decision to prohibit banks from cryptocurrency trade

The Supreme Court has reserved its order on pleas objecting to Reserve Bank of India (RBI)’s decision prohibiting banks and financial institutions from providing services in relation to cryptocurrencies or dealing with cryptocurrency trade.

Supreme Court was hearing a plea filed by the Internet and Mobile Association of India (IMAI) against the Reserve Bank of India.

RBI had released a statement on July 3, 2018  directing all banks and financial institutions to stop dealing with individuals and businesses dealing in virtual currencies. Which implicitly meant a ban on banks in dealing with companies or individuals that trade in cryptocurrencies.

“Virtual Currencies (VCs), also variously referred to as cryptocurrencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others… 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,” then released RBI statement read.

The counsel appearing for IMAI argued that till there is a regulation on cryptocurrency  there can be no questions by any authority to curb cryptocurrency, as no policy has yet been framed.

The counsel further argued that any move should not interpreted in general terms. He said, “Before prohibition is imposed we should know how this would impact economy.”

IMAI has said that bitcoins are not extinguishable once they have been created, they are also indestructible. IMAI has said in its plea that Bitcoins don’t disappear if they are not utilised.

However, the central bank had filed an affidavit in the SC on September 4, 2019 stating that there was no ban on cryptocurrency.

Firstly, the RBI has not prohibited VCs (virtual currencies) in the country. The RBI has directed the entities regulated by it to not provide services to those persons or entities dealing in or settling VCs… The RBI has been able to ringfence the entities regulated by it from being involved in activities that pose reputational and financial risks along with other legal and operational risks”, the affidavit read.