Not So Quick
Earlier this week the Supreme Court of India made waves in the world of cryptocurrencies, as they overturned a blanket ban, imposed by the Reserve Bank of India, on the industry.
While many were quick to celebrate this decision – with various cryptocurrency exchanges immediately reinstating services – it should be important to keep expectations in check.
Indian news outlets are reporting that the Reserve Bank of India is obviously unsatisfied with the decision from the Supreme Court. As such, they will be filing for a review of the decision, in hopes of reinstating their ban.
RBI Ban Reversal
The initial ban was first imposed in mid-2018 by the RBI. At the time of the ban, the RBI noted that it came after multiple warnings to the public on what they perceived were dangers associated with virtual currencies. The following is a brief excerpt from their ban, which illuminates the scope of its reach.
“…it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer/receipt of money in accounts relating to purchase/sale of VCs.”
The decision for a reversal, while made on a variety of factors, came down to a few key points:
- A complete ban was ‘disproportionate’ to perceived risks by the RBI
- RBI was unable to prove that any harm was endured by regulated banks
- The RBI is to regulate, not prohibit
When perusing the Court’s recent documentation surrounding their decision, it is interesting to note that a heavy emphasis in the proceedings came from previous, similar, decisions made by the European Union Parliament. The following quote from the European Union Parliament was used as a point of argument:
“We are not in favour of general bans on cryptocurrencies or barring the interaction between cryptocurrency business and the formal financial sector as a whole, such as is the case in China for example. That would go too far in our opinion. As long as good safeguards are in place protecting the formal financial sector and more in general society as a whole, such as rules combating money laundering, terrorist financing, tax evasion and maybe a more comprehensive set of rules aiming at protecting legitimate users (such as ordinary consumers and investors), that should be sufficient.”
When it was all said and done, the Supreme Court of India found that the ban were, “…to be set aside on the ground of proportionality.”
With a population totaling over 1.3billion, India represents over 17% of the entire Human race – placing it neck and neck with China, as Earth’s most populous country.
To call the decision of the Supreme Court of India a ‘positive’ one is an understatement. While the effects may not be seen overnight, the world of cryptocurrencies stands to benefit greatly through a potentially massive influx of participants.
Not Out of the Woods
Beyond the RBI continuing their crusade to maintain their previous blanket ban on cryptocurrencies, there does remain one particularly large hurdle. It was leaked, in 2019, that a bill was on the table for review in India, titled ‘Banning of Cryptocurrency & Regulation of Official Digital Currency Bill’.
While this has not yet come up for consideration, it would have the potential to decimate the newly liberated world of cryptocurrencies. With various nations around the world scrambling to develop, and establish, their own central bank digital currency (CBDC), we may not have seen the last of this yet.
In Other News
Perhaps weighing in on the decision to overturn the RBI’s ban, is recent advancement surrounding regulation of cryptocurrencies being seen around the world. One such example of this would be South Korea. From day one, cryptocurrencies have captured the intrigue of South Koreans. Unlike the approach of the RBI, the nation has decided to regulate, rather than ban, cryptocurrencies and their supporting service providers.