Forex and Crypto News

The Supreme Court of India forbade banks to work with cryptocurrencies

15:44 25 February /2019

Yesterday, the Supreme Court refused to lift the ban of the Reserve Bank of India on cryptocurrency transactions.

By its order, the court prohibits all financial institutions to carry out any cryptocurrency transactions between individuals and companies. We are talking about all transactions that allow the transfer and receipt of funds between accounts, and the use of cryptocurrencies as security in lending.

Last month, Zebpay, a major cryptocurrency exchange in India, told customers that it might not be able to let them withdraw funds. After a court order, the exchange was forced to freeze the withdraw.

When the RBI’s decree appeared in April, the country's banks were given only three months to stop any transactions with cryptocurrencies. The central bank sought to protect local banks from the risks associated with the cryptocurrency. This was followed by a statement by Treasury Secretary Arun Jaitley that India does not recognize the cryptocurrency as legal tender. The regulator considers the main risks to the cryptocurrency to be the outflow of the capital, money laundering and lack of price stability. Instead of developing legislation to address these problems, the RBI and the Supreme Court chose to completely deny banks the ability to make transactions.

As a result, Indian crypto traders will be forced to make cash transactions. In addition, the cryptocurrency trading sites will lose the opportunity to conduct transactions through banks. The ban will undoubtedly have a negative impact on the popularity of cryptocurrency in India. The Reserve Bank of India regulates almost all banks and financial institutions. Without banking support, people will stop investing in these currencies and engage in trading.

So far, however, all is not lost. This month, the Supreme Court will consider a petition from the Indian Association of Internet and Mobile Communications with a request to cancel the decree.

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