New Delhi: Supreme Court on Wednesday allowed banks to handle cryptocurrency transactions from exchanges and traders, overturning a Reserve Bank of India (RBI) ban that dealt the thriving industry a major blow. RBI had in April 2018 ordered financial institutions to break off all ties with individuals or businesses dealing in virtual currency such as Bitcoin within three months. The ban led to plummeting trade volumes and exchanges shutting their businesses.
A three-judge Supreme Court bench said in their ruling that while the RBI had the power to take pre-emptive action, the court questioned the “proportionality” of such measures. “RBI needs to show at least some semblance of any damage suffered by its regulated entities. But there is none,” the court said in a 180-page ruling.
Governments around the world have been looking into ways to regulate cryptocurrencies but no major economy has taken the drastic step of placing a blanket ban on owning them, even though concern has been raised about the misuse of consumer data and its possible impact on the financial system. The need for regulations surrounding digital currencies has also gained momentum after Facebook Inc announced plans to launch its cryptocurrency, Libra.
Several central banks around the world are also considering issuing their own digital currencies in the next few years, the Bank for International Settlements (BIS) said in a report in January.
A Union government-appointed committee had recommended considering the launch of an officially backed digital currency for use in the country, which can function like bank notes and be regulated by the central bank.
Eyes will now be on the RBI to see if it comes up with new regulations surrounding digital currencies that can address regulatory concerns as well as aid growth in the ecosystem, said L Viswanathan, a partner at the Cyril Amarchand Mangaldas law firm. “This might also catalyse the potential for the use of blockchain in diverse areas,” Viswanathan said of the ruling. (Inputs from News Agencies)
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