The supreme court of India will not be telling the Reserve Bank of India to relent in its decision to keep banks free of cryptocurrency, according to Quartz.
The decision to ban the nation’s banks from processing the orders of businesses that deal with cryptocurrency was made in April – entities were given three months to comply.
At the time of the ban, 5 million Indians were transacting tens of millions of dollars’ worth of cryptocurrency daily via the country’s 12 operational cryptocurrency exchanges. One petition against the decision gathered 22,000 signatures in only five days.
The central bank was taken to court that same month; many parties complained that the decision was arbitrary and discriminatory. The hearing had been set for the 20th of July, two weeks after the ban comes into force, but in the end the hearing was held today (3rd of July) following a request from the Internet and Mobile association of India.
The court has upheld the ban.
Rashmi Deshpande, associate partner at Khaitan & Co, a law firm representing cryptocurrency exchange Kali Digital Eco-Systems, said: “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. However, now that the ban will continue, the banking route for the exchanges and its users will be completely choked.”
India was once responsible for as much as ten percent of all Bitcoin transactions. It was in November 2017 that a government committee first suggested that cryptocurrency exchanges be shut down, and in December 2017 the country’s tax authority began investigating them, without revealing the reason why. At that point the government had made it clear that cryptocurrency would never be legal tender in the country, but no official decision had been made explicitly banning its use.
Meanwhile, use exploded in the subcontinent, with some exchanges reporting hundreds of thousands of new users every month.
Life finds a way
At least two cryptocurrency exchanges will be launching new services to avoid using banks, according to the Economic Times of India. WazirX, a cryptocurrency exchange from Navi Mumbai, has announced a peer-to-peer transfer service which will begin as soon as the ban comes into effect.
It will connect buyers and sellers and functions as an escrow account, which means that the seller deposits cryptocurrency with WazirX, the buyer pays the seller in fiat, and then WazirX released the cryptocurrency to the buyer.
WazirX CEO Nischal Shetty said: “If banking is something the exchanges are not allowed to do, then the solution is something that direct banking doesn’t come in.”
Mumbai-based exchange Koinex will be launching a similar service, Koinex Loop, on the same date. Co-founder Rahul Raj wrote in Medium: “The recent RBI directive practically cripples the otherwise blossoming ecosystem for this next wave of technological shift…Loop falls in line with our ultimate goal of fuelling a blockchain powered internet in India.”
A draft of cryptocurrency regulations will presented at the hearing scheduled for the 20th of July. Subhash Chandra Garg, Secretary of Department of Economic Affairs, told local news outlet ET Now: “We are fairly close to developing a template that might be in the best interests of our country. We have moved pretty far in this regard, and we have prepared a draft 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.”