INTERNATIONAL - India’s top court refused to overturn a decision by the country’s central bank ordering banks not to deal in cryptocurrencies, a move that will make the entire industry illegal in Asia’s third-largest economy.
A bench headed by Chief Justice Dipak Misra said the Reserve Bank of India’s directive prohibiting banks, financial institutions and other regulated institutions from providing any services related to virtual currencies will remain implemented. In a circular dated April 6 and effective immediately, the bank gave them three months to exit operations.
The decision comes after the central bank told the top court that Bitcoins cannot be treated as currency under the country’s existing law that mandates coins to be made of metal or exist in physical form and stamped by the government.
As central banks across the globe formulate an approach to digital currencies, the RBI has hardened its position from cautioning investors in 2013 to prohibiting banks from providing services to users and traders of cryptocurrencies. Amid fears that the encrypted cryptocurrency transactions could be used for money laundering and terror funding, it stopped short of a complete ban and asked government to decide.
The finance ministry is yet to take final call but the recent volatility in cryptocurrency markets has only emboldened policymakers around the world to take a more skeptical view of the trade. Investors and technology platform providers for cryptocurrencies are worried as uncertainty looms over future of digital currencies.
“Nobody is able to price the risk currently. The minute you have clarity on exchanges and whether digital currencies can be used as a medium of exchange or payment, or if it is a commodity, there will be less speculation and much more stability in pricing,” said G.V. Anand Bhushan, a partner at law firm Shardul Amarchand Mangaldas & Co.
The top court was hearing a public interest litigation, akin to class action lawsuit, filed by advocate Dwaipayan Bhowmick seeking regulations on use of cryptocurrencies. Start-ups providing virtual currency trading platforms, like Flintstone Technologies Pvt. Ltd. and Kali Digital Ecosystems Pvt. Ltd., had appealed to various high courts and challenged the central bank’s ban on banks from providing services to users, holders and traders of virtual currencies.