New Delhi: In 2018, the Reserve Bank of India (RBI) had banned all the banks and financial institutions from entering any transactions with any virtual currency including Bitcoins. At present, the Supreme Court of India has lifted the ban on cryptocurrency, in its judgement, in the petition challenging this ban.
The government and the RBI have not given any reaction to it. However, it remains to be seen if the government or the RBI take any decision following the Supreme Court judgement as to the Indian government, in the parliament, has clarified the cryptocurrency to be illegal. The cryptocurrency was compared to a ‘Ponzi Scheme’ in the parliament. Moreover, the RBI also had issued repeated warnings to the investors.
Two years ago, The RBI barred banks and financial institutions from transacting in cryptocurrency. The RBI issued a circular to that effect. However, the Internet and Mobile Banking Association (IMAI) and some other petitioners had challenged the circular in the Supreme Court.
IMAI had claimed that the RBI had not studied the issue before imposing the ban and had also not analysed that financial implications of the decision. India should look at other countries for this purpose. The petition said that the other countries are not only permitting the use of cryptocurrency, but also are preparing to release their cryptocurrencies. The petitioners underlined that the Indian government had not banned cryptocurrency and this RBI decision was taken unilaterally.
While replying to the allegations, during the hearing, RBI said that it had taken the decision to safeguard the banks and financial institutions under its control and care, against the risks related to cryptocurrency.
The companies involved in the cryptocurrency exchange transactions have welcomed the decision of the Supreme Court. In the reaction, it said that it is a landmark judgement and now there is a clarity in the matter.
But neither the government nor the RBI has given any reaction on the Supreme court verdict. The government and the RBI have said in the past that cryptocurrency is illegal in India. During the 2018 budget session of the parliament, the then Finance Minister Arun Jaitley had compared the cryptocurrency to ‘Ponzi Schemes’. The government had also cautioned that the citizens could lose all the investment made in these virtual currencies. The RBI had warned the investors that cryptocurrency is a bubble and can burst anytime.
Meanwhile, in 2017, the cryptocurrency valuation saw a steep rise. The investors turned to this with an expectation to make profits. The cryptocurrency transaction volume, in India, reached USD 12.9 billion. At the end of 2017, the valuation of Bitcoins increased 35 times in 30 days, crossing the USD 20,000 mark and crashed within the next few weeks by nearly 70%. The RBI decision was based on this background.