The uncertainty may be finally ending for the Indian cryptocurrency ecosystem. Today (September 11th 2018), the Supreme Court will begin the final hearings in the case between virtual money exchanges and the Reserve Bank of India (RBI). At the end of the arguments, one will know if exchanges will receive any reprieve from banking regulator’s crackdown. The country’s foremost court is hearing petitions and the case against the circular issue provided by RBI in April 2018. In it, the Central Bank issued a prohibitive ban that directed banks and other regulated financial institutions to stop providing services to crypto exchanges and the wider industry within three months. The RBI act, shows that Bitcoin can neither be used as currency or money. A last minute petition to grant a temporary stay against the RBI circular that was denied by the Supreme Court on July 3rd, days before the deadline that came into effect on July 6th. The impact of the policy has hugely nullified the booming domestic cryptocurrency trading industry with a number of exchanges seeing substantial decline in active users. For instance the Unocoin, Bengaluru based virtual currency exchange, has seen average monthly transacting on the website of about from peak over 200,000 traders to merely 20,000 in the months following the crackdown. Not surprisingly, the exchanges have dragged the banks down to the court and their plea for interim relief has not been granted. Besides RBI, Narendra Modi government, market regulator Securities and Exchange Board of India (SEBI), enforcement directorate and income tax department are parties to the case filed by the exchanges.
The RBI states that these virtual currencies do not have any backing, ie not backed by assets. These currencies don’t have any intrinsic value. These are not secure and trading and keeping the money will lead to high taxation problems in the country. The exchanges have always stated that they open to the regulatory actions and opinions along with the scrutiny and
The RBI can neither decide whether Bitcoin is legal or illegal, they are bound by the statutory regulations present in the Constitution. RBI states that FEMA allows them to declare a currency as legal or not only if they have characteristics similar to money, cheque or deposit. According to RBI, the digital currency does not fall into the category of foreign currency and also puts it away from the pursuit of PSSA.
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