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Top 7 highlights from the SC judgment lifting the RBI crypto ban

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SC judgment on cryptocurrency ban imposed by RBI

Top 7 highlights from the SC judgment lifting the RBI crypto ban

In a significant judgement today, the Supreme Court of India stuck off the curbs imposed by the RBI on regulated entities like Banks and NBFCs to not deal with cryptocurrencies. The court led by 3-bench judge comprising Justices R F Nariman, Aniruddha Bose and V Ramasubramanian held the ban as “disproportionate”.
The RBI had issued a circular in April 2018 to ban banks from dealing in cryptocurrencies or offering services to businesses dealing with cryptocurrencies. This was challenged in Supreme court by Internet and Mobile Association of India. The case was fought for 2 years and finally, on 4th March 2020, the court ruled in the favour of IAMAI.

Here are 7 key takeaways from this judgement:

  1. The court observed that in 5 years, RBI did not find any adverse impact of the activities of cryptocurrency exchanges on RBI regulated entities like banks and NBFCs.
  2. The court highlighted that as per the Constitution of India, any regulator like RBI should not outrightly impose a ban on an industry, like the virtual currencies, especially if it does not show an adverse impact on their industry, simply for the lack of not being able to frame a policy for regulating it.
  3. The court declared that the right to create something that does not violate any existing law is an unsaid fundamental law. Hence, the right to create a new industry of cryptocurrencies and exchanges vests with the citizens along with the fundamental right to trade.
  4. The court observed that the cryptocurrency exchanges are completely cut off from their lifelines if RBI disallows the banking sector to provide banking support, and hence this is unfair in the eyes of the constitution. For the uninformed, cryptocurrencies were never banned in India. Only the banks were not providing banking support to the cryptocurrency exchanges – this means that if an investor wanted to buy Bitcoin or other crypto assets, there was no way to convert their INR into Bitcoin, because the exchange could not accept INR as a mode of payment.
  5. The judgement had raised rightful questions on RBI’s powers and misuse of monopoly-styled authority in jolting an entire industry which has not been given a fair chance to have its own standing.
  6. In a way, the verdict upholds the legality of cryptocurrencies and decriminalizes the investors who have already invested in various crypto assets like Bitcoin, Ether, and various others.
  7. Cryptocurrency exchanges in India can now legally operate for fiat-to-crypto trading pairs as well, in addition to crypto-to-crypto pairs. It remains to be seen how soon will the banks start supporting the exchanges.

The judgement that has come after 2 years of hard struggle has given blockchain start-ups dealing in cryptocurrencies in India, a new lease of life. The Apex court judgement has sent the whole crypto-community in India into a frenzy and rightly so.

The biggest impact of the verdict could be seen in the way of RBI drafting a regulatory policy around cryptocurrencies, instead of outrightly throttling the industry altogether by not providing any support.

This judgement is a needful boost for the crypto community in India.

Stay tuned as we continue to share our thoughts on the impact of this epic judgement.

This article has been written by Ish Goel, CEO @ Somish Blockchain Labs. Views are his own. Disclaimer: This is not an investment advice and the opinions expressed in this article are of the writer only.

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