The Indian Supreme court on Oct. 25, 2018, directed the central government to articulate its position on cryptocurrency within two weeks.
The directive came during a hearing in which cryptocurrency exchanges challenged the April 2018 circular targeting their operations. The circular prohibited Indian banks from dealing with individuals and businesses engaged in cryptocurrencies.
It is noteworthy that there is no ban on the trade of cryptocurrencies in India. However, the RBI fervently discourages their use and thereby stopping all trade and exchanges. Actually, the government has been cautioning investors on cryptocurrencies since the year 2013.
Ambiguity on Legality
The Supreme Court directive is a bold move towards abolishing the ambiguity over the legality of cryptocurrencies in India. India’s finance minister, Arun Jaitley’s, during a budget speech neither mentioned any ban on cryptocurrencies nor was any regulations. However his tone clear that the government was not willing to tolerate cryptocurrencies.
Arun Jaitley was categorical that cryptocurrencies are not legal tender, a position shared by the RBI. Relatedly, he declared that the government enforce measures to eliminate the use of cryptocurrencies in the payment system.
As a result, several petitions have been filed at the Supreme Court by industry groups and cryptocurrency exchanges. Notably, the petitions are challenging the banking blockade of April 2018 enforced by the RBI. The blockade has seriously devastated and shuttered the operations of cryptocurrency exchanges in India.
The RBI has always been cagey when asked to provide a legal position on cryptocurrencies. As a result, the Supreme Court has clearly ordered the government to release its report on the cryptocurrency issue.
The legal counsel representing the exchanges was more categorical in his argument.
“We have got employees. There are jobs,”
The Arrest of Unocoin Founders
The Supreme Court directive comes in the same week in which the co-founders of Unocoin were arrested. The two, Sathvik Viswanath and Harish BN, were arrested for installing a cryptocurrency ATM in Bangalore. Cryptocurrency exchanges fear that the arrest of the two opens the door for sporadic arrests and closure of exchanges.
Interestingly, the directive comes days after India’s National Association of Software and Services Companies (NASSCOM) president Debjani Ghosh declared cryptocurrencies as illegal.
Clearly, the Supreme Court directive means that the legality of cryptocurrencies in India is nearing its end. In two weeks’ time, the government will provide its position on the legality of cryptocurrencies and remove the ambiguity. The ruling will certainly have clear implications on India’s thriving cryptocurrency industry and its startups.