India's Supreme Court building in New Delhi. Photo: AFP

India’s top court has struck down the Reserve Bank of India’s (RBI) controversial ban on banks doing business with crypto-related entities. 

Supreme Court of India justices Rohinton Nariman, S Ravindra Bhat, and V Ramasubramanian handed down the judgment early on March 4, litigation news site Live Law reported.

The bench ruled that the central bank’s order was “unconstitutional,” Quartz India reported.

Landmark ruling

India’s central bank, the Reserve Bank of India, imposed a blanket ban on banks with doing business with crypto firms in April 2018, but it did not come into effect until July of that year.

Following both public and industry-led petitions, a case combining challenges against the central bank was brought before the Supreme Court by the Internet & Mobile Association of India (IAMAI). Hearings for the challenge were held over two weeks in January of this year, Cointelegraph reported.

The IAMAI is a not-for-profit industry body whose mandate is to appeal to governments on behalf of Internet industry consumers, shareholders and investors. Members include Yahoo! India, Apple, eBay, Unocoin and Etsy.

Live Law reported that the justices ruled that the RBI’s action was “disproportionate.” Key arguments in the case included the central bank’s contention that cryptocurrency is a digital means of payment and that the institution was “empowered by law” in its intervention. 

This was countered by IAMAI counsel Ashim Sood, who argued they can oscillate between serving as a commodity or store of value and as a medium of exchange. Sood argued that the RBI did not have the authority to ban financial firms from providing services to cryptocurrency-related businesses.

Future of crypto

With the court delivering its verdict on the landmark RBI case, the legal and regulatory climate for cryptocurrencies in India now appears to be facing one last hurdle. In the fall of 2019, the Indian government opted to delay the introduction of a draft bill on a potential cryptocurrency ban to parliament in the 2019 winter session.

The bill – entitled “Banning of Cryptocurrency & Regulation of Official Digital Currencies” – reportedly intended not only to impose a complete ban on the use of crypto in India but also to establish the foundations for a state-backed “Digital Rupee” issued by the Reserve Bank of India.

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