India’s top court refuses to lift ban on cryptocurrency exchanges

Bad news.
Bad news.
Image: Reuters/Pawel Kopczynski
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India’s supreme court has refused to grant any interim relief to cryptocurrency exchanges against the Reserve Bank of India’s (RBI) crackdown on them.

On April 05, the RBI had directed all banks to wind up within three months any existing banking relationships with virtual currency exchanges and traders. The ban kicks in from July 06.

Jolted by the central bank’s diktat, a number of cryptocurrency exchanges had dragged the central bank to the supreme court in April. In May, the court had set the next date for the hearing of the case on July 20, two weeks after the ban would come into force. But the Internet and Mobile Association of India (IAMAI), which counts bitcoin exchanges as its members, subsequently approached the court for an early hearing, which took place today (July 03).

“This a win for the RBI and a big blow to virtual currency exchanges and traders. In our earlier request to the RBI as well, we had asked it to extend the deadline by a month after the July 20 hearing,” said Rashmi Deshpande, associate partner at Khaitan & Co, a law firm representing Kali Digital Eco-Systems, an Indian exchange planning to begin operations later this year.

“However, now that the ban will continue, the banking route for the exchanges and its users will be completely choked,” Deshpande added.

In the previous hearing on May 17, the apex court had asked these exchanges to submit their representation against the central bank. The firms had engaged with the RBI during the last week of May and early June.

“We had submitted a detailed presentation that could have given RBI a clearer picture on what is blockchain, how the exchanges work, etc. But we hadn’t heard back from them yet,” said Nischal Shetty, founder and CEO of WazirX, another Indian cryptocurrency exchange that has challenged the ban. “Today, the supreme court has also directed the RBI to respond to those representations made by the firms in the next seven days.”

Despite the court upholding the ban, the exchanges are hopeful. The Narendra Modi government is in the final stages of finalising the draft regulation on bitcoin and other currencies, according to a senior government official.

“We have prepared a draft (on virtual currencies) that entails what parts of this businesses should be banned and what should be preserved. This should be discussed by the first week of July and we should wrap this up within in the first fortnight of July,” Subhash Chandra Garg, secretary in the department of economic affairs, who is heading a committee on cryptocurrency regulation, told television news channel ET Now last month.

Now, all eyes are on the government and the next supreme court hearing on July 20.