New Delhi: The Supreme Court on Wednesday left the doors ajar for cryptocurrency in India as it quashed the 2018 circular by the Reserve Bank of India (RBI) putting a complete ban on banking services for the virtual currency.
A three-judge bench held the 2018 circular as unreasonable and disproportionate.
The 2018 circular had stated that the entities regulated by the RBI are prohibited from providing any service in relation to virtual currencies, including those of transfer or receipt of money in accounts relating to the purchase or sale of virtual currencies.
The top court has found the complete prohibition as bad in law and disproportionate to the objectives sought to be achieved by the apex banking regulator, RBI.
With this judgment, decks should be cleared for a regulatory regime of cryptocurrency in India instead of a complete ban.
In a separate bunch of petitions, the Supreme Court is also examining the issues related to regulation of cryptocurrency. The judgment on Wednesday will have an impact on the pending case too.
The petition, filed by the Internet and Mobile Association of India, said the RBI had banned cryptocurrencies on moral grounds since no prior studies were conducted to analyse the effect of these virtual currencies on the economy.
IAMAI had added that the block-chain technology adopted in these virtual currencies was not disputed and, therefore, a blanket ban was "arbitrary, unfair and unconstitutional".
RBI, in its response, had stated that it had not directly banned virtual currencies and that the ban was only applicable to regulated entities under the RBI.
The regulator said the prohibition was to protect entities from “activities that pose reputational and financial risks along with other legal and operational risks”.
The RBI also said there were risks of terror financing and money laundering through cryptocurrency.