Reserve bank of India (RBI) banned banks from transacting with Indian Exchanges in April and asked the local banks to wrap up their services within three months. In response to this ban, local cryptocurrency exchanges have gone to the Supreme court to challenge this ban. The case is with the supreme court of India, but we have got some hints from the RBI’s reply to the court that there might be a possible ban or crypto exchanges on July 30th.
RBI Banning Banks from Transacting with Indian Exchanges
RBI is India’s central bank, and all the financial institutions come under its roof. It controls all the institutions dealing with money. On April 5th, RBI requested all the banking institutions coming under its control to stop supporting crypto exchanges and other entities/persons dealing with cryptocurrencies. This means that they are denied bank accounts and other services and given three months time for closing their bank account and returning the customer funds. This ban is not a complete ban like China, where digital currency exchanges are asked to shut down and stop the services.
Indian Exchanges went to Court to Challenge RBI Ban
Many Indian crypto exchanges took the case to court arguing that it is a fundamental right to have a bank account and RBI cannot deny banks from stopping services to their citizens or entities unless involved in terrorist activities or money laundering. The court took the case and issued a notice to RBI and asked it to respond to the notice on banning banks from transacting with exchanges.
RBI Response Hints at Exchange ban
RBI in response to the notice has hinted that there might be a possible ban on crypto exchanges in the coming days. In its response, it has said that its a policy decision pending with the government of India. The forum to test the correctness is the parliament and not the court. So it has asked the court not to hear public interest litigation regarding the legality of cryptocurrencies.
RBI further said that an inter-disciplinary committee is formed by the government under Special secretary (Economic Affairs) and they will be submitting their report by July 30th. The committee will decide the legality of Bitcoin and other cryptocurrencies in India. RBI has given enough hints that there might be a possible ban on exchanges on July 3oth. The government slowed down adoption by stalling the banking service to the crypto exchanges, and once the adoption has slowed down, they might decide to ban it since it would be much easier now and won’t shock people that much.
More Exchanges Start Service Despite RBI Ban
More Crypto exchanges have started in the last few weeks in spite of RBI ban. The exchanges are not giving up, and even more, exchanges are starting in the coming days. CoinDCX announced its launch just days after the RBI ban. Also, Singapore based Alluma and CoinRecoin started their service in India. In response to the RBI ban, the new exchanges said that India is an important market and there will be hindrance and criticism whenever a new technology is introduced in the market. Despite the challenges in the regulatory environment, exchanges start their shop in India due to a large number of people and their purchasing power. Traders were also not be giving up and are making use of this three-month window to stack up more cryptocurrencies for future trading in foreign exchanges.
So we need to wait and watch if there will be an exchange ban on July 30th or will the government allow exchanges to function without banking support. In that latter case, it would be a crypto-crypto trading and fiat can make its way into buying crypto using peer-to-peer exchanges like localbitocin,holdhold, etc.