It’s going to be a summer of uncertainty for India’s cryptocurrency industry

Caught in a web.
Caught in a web.
Image: Reuters/Dado Ruvic
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The fate of Indian cryptocurrency exchanges continues to be in a limbo as they await clarity from the Reserve Bank of India (RBI) and the country’s top court.

Last month, the central bank barred all banks from having any business relationship with these exchanges, with a directive to wind down all existing accounts by the first week of July. Staring at the end of the road in India, the virtual currency exchanges then took the legal route appealing against the RBI order at India’s supreme court.

However, the supreme court has not provided any breather to the exchanges yet. “The petitioners shall be at liberty to submit a representation to the competent authority of RBI within two weeks hence which shall be dealt with in accordance with law,” read a May 17 order given by chief justice Dipak Misra, a copy of which has been seen by Quartz. The other judges on the bench included A M Khanwilkar and D Y Chandrachud.

Meanwhile, India’s digital currency ecosystem is in a quandary as the next date for the hearing of the case in the apex court is July 20, two weeks after the RBI deadline to close down all crypto-related bank accounts.

“The understanding is that this means that the ban will continue, at least for the time being. Businesses are getting affected due to this uncertainty and this phase will continue for a while,” said Kunal Barchha, director at Kali Digital Eco-Systems, which plans to launch its cryptocurrency exchange in the next few months. Kali had also challenged the RBI’s diktat in the Delhi high court last month.

Hope and despair

With the latest supreme court order, it is up to the RBI now. “Among the major grievances that these virtual currency exchanges have is that the decision had been taken by the RBI without taking their views into account,” said Anirudh Rastogi, managing partner at legal firm TRA Law, which has filed the petition for four exchanges in the supreme court.

“And second, there shouldn’t be an industry wide-ban, instead it can be implemented on a case-to-case basis where it is seen that the firms are violating any of the norms,” he said. Most of these exchanges claim that they follow strict guidelines to ensure that there is no money laundering or illicit activities, and the steps taken by them to self-regulate address several concerns raised by the RBI. ”Hopefully, the central bank will be able to see merit in the steps taken by the firms in the recommendations made,” added Rastogi.

Still, other cryptocurrency players have been preparing for a scenario where there won’t be any respite from the central bank’s order. “Lot of firms are looking at launching or have already launched crypto-to-crypto trade (which allows customers to buy one cryptocurrency in exchange for another) to comply with the new RBI rule,” said the head of another exchange, requesting anonymity. “Some others are also exploring to set up offices in other countries, so most exchanges have been looking at other options.”

The supreme court has also barred petitioners from filing any case against the RBI on the subject of cryptocurrency in any of the other high courts. All the cases on this topic will be merged with the existing petitions and will be heard collectively, as per the central bank’s request.

“There were cases being filed in the Calcutta high court, Delhi high court, etc. So the RBI asked the supreme court to merge all the cases on bitcoin and other such currencies in order to save time,” said Dwaipayan Bhowmick, a lawyer who had filed a public interest litigation in the supreme court in November requesting that these currencies be regulated.

Meanwhile, the supreme court has also asked the attorney general of India (AGI), K K Venugopal, who is the government’s chief legal advisor, to be present on the next date of hearing. “The union government is also a party in some of the cases that has been filed so that may be one of the reasons for calling the AGI,” said a lawyer, requesting anonymity. “But also it clearly shows that the court thinks it’s a significant matter and has therefore asked the AGI to be present.”