The Supreme Court on Thursday refused to stay the Reserve Bank of India’s decision that mandated banks, e-wallets, and payment gateway providers to withdraw support for cryptocurrency exchanges and other businesses dealing with virtual currencies. However, it allowed cryptocurrency exchanges, their shareholders, traders and other individuals to present their cases within two weeks to the RBI, which will look into the issue in accordance with the law.
Various PILs, including the one filed by a group of 11different representatives from various crypto-related businesses, have challenged the RBI’s April 6 circular that declared cryptocurrency-related businesses like virtual currencies, crypto assets, etc illegal in India. The regulator has given banks a deadline of July 6 to adhere to the new rule.
A bench led by Chief Justice Dipak Misra while transferring to itself various other similar petitions pending before the high courts of Delhi and Calcutta also stayed proceedings before the HCs. It also restrained all the HCs from entertaining any other petition against the RBI circular. It also sought the attorney general’s assistance in the matter. Last week, it had sought response from the RBI and the Centre.
The Reserve Bank, through senior counsel Shyam Divan, told the bench that there is a need to have a proper regulatory mechanism in place and for this the finance ministry’s Department of Economic Affairs had constituted an interdisciplinary committee last year to examine virtual currencies and came up with a regulatory framework.
Alleging infringement on their right to trade that is guaranteed in the Constitution, the petition said the RBI lacks the authority to classify crypto assets as legal or illegal assets, but is seeking indirect, colourable means to outlaw crypto assets, which as per the finance ministry do not qualify as ‘legal tender’ in India.
“Even while there is no law in India which declared virtual currencies/crypto assets/ crypto currency and the trade or usage of the same as illegal, the impugned circular has acted basing itself on such a presumption of illegality, the petition filed by the group led by Rajdeep Singh said.
The group challenging the constitutional validity of the RBI’s decision also has cryptocurrency exchanges, their shareholders and traders as other petitioners. While the circular does not make cryptocurrency trading or usage illegal, it makes it impossible for exchanges to offer such services, the petitions said.
The Internet and Mobile Association of India (IAMAI) this week moved the apex court seeking a stay on the RBI’s decision to not allow banks to provide services to cryptocurrency trading platforms. However, the matter is yet to come up for hearing.