- Banks in India can now officially trade cryptocurrencies as the Supreme court of India lifts RBI's ban on crypto.
- Still, a proposed bill is pending to be reviewed in the government that could turn the tables for cryptocurrency firms to flourish in India.
- The regulatory uncertainty would be the most crucial concern for the government.
The supreme court overruled the Reserve Bank of India’s (RBI) circular that prohibited banks from cryptocurrency trading as on the 4th of March. And, investors are looking forward to list the Indian currency on crypto exchanges. Regulations, however, could also make life in India challenging for cryptocurrency players.
Still, there is a proposed bill currently pending with the government that could prove questionable— the ban on cryptocurrencies and the Official Digital Currency Law legislation, 2019.
The directive comes as a blessing for the country's supporters of the virtual currency (VC). The order from the apex court followed a plea from India's Internet and Mobile Association that objected to the ban on the central bank.
RBI's ban on cryptocurrency trading struct companies such as Koinex, Unocoin, Zebpay, and Cryptokart severely. According to the Internet and Mobile Association of India (IAMAI), cryptocurrency firms had about ₹1365 crore customer funds reserves, with a monthly volume of transactions of about ₹5,000 crores.
The government or RBI is unlikely to let a truly decentralized currency thrive in India. While promoters of cryptocurrencies want it to operate as a parallel financial system that rivals backed currencies by central banks, this is unlikely to happen.
What Supreme Cout said on the ban imposed by RBI' on cryptocurrency
An analysis of the 180-page decision indicates that the verdict's conclusions are not in line with what the industry was assuming.
In fact, the whole decision is based on the infringement of one of the Indian constitution's fundamental rights–Article 19(1)(g), which grants the freedom to practice any profession. The Supreme Court held that the measure of the RBI violated Section 19(1)(g) for virtual currency transactions and that the level of prohibition was not proportionate to the threat. The decision also found that the RBI had not disproved the danger with empirical data, or those possible interventions had been credibly investigated.
The court also pointed to cryptocurrency as a blockchain 's "by-product" and said the two shall be differentiated by the government. Previously, this restraint from dividing blockchain and crypto was the idea behind most federal policies. The industry has merely won a hard-fought war and we can hope not to see any similar reactive ban again.
The clock is, however, ticking at the legislative branch's reaction, which could push to enact legislation soon. Nonetheless, RBI can only push a successful appeal if it attains notable evidence of a monetary threat from cryptocurrencies.
Positive Signs
There have been many legislative leaders outside the domain of financial regulators and lawmakers speaking up for a more radical approach to blockchain in India.
Recently a Draft National Strategy for Blockchain was issued by the federal IT ministry. This study looked at more sophisticated blockchain technologies, e.g. around data monetization, and urged India to create a global blockchain talent development hub. This report was highly critical of policy actions, claiming openly that 'blockchain understanding inside government is very poor' and that 'lack of regulatory clarity' is the No. 1 barrier to business investment in this sector.
Home to Hyderabad, the state of Telangana has named a whole region as its "blockchain district" with resources tailored for start-ups in blockchain discipline. Whereas, Tamil Nadu has unveiled an ambitious blockchain e-governance infrastructure, which could be one of the world's largest ventures, serving 10 million people. All these states participate in legislative consultation, through internal mechanisms, with the federal government.