In a major move, the Supreme Court has declared the Reserve Bank of India’s order banning trading in crypto-currency—electronic cash—unconstitutional. The order was passed by a three-judge Bench headed by Justice Rohinton Nariman.
In April 2018, the central bank had imposed a ban on transactions undertaken in virtual currencies. The move was aimed at protecting the Indian market and the interests of the small and retail investors. Besides, the ban was also expected to prevent money laundering. A notification to this effect was issued by the RBI on April 6, 2018, which was challenged by the Internet and Mobile Association of India (IMAI).
The RBI has been uncomfortable with crypto-currency trading since December 2013, when it first cautioned the markets.
Trading in crypto-currency or virtual currencies has always been considered suspicious by most banks across the globe, as it poses risks relating to money laundering besides creating a complex alternative system.
Crypto-currency is an internet-based medium of financial transaction, using cryptographical functions to carry out trading between two entities through private and public keys.
Typically, trading or crypto-currency transactions are not regulated or controlled by any central authority. Banks and financial institutions can deal in crypto-currency independently and trading and transfers between two entities can be undertaken with a minimal processing fees.
Crypto-currency can be of various types, bitcoin being one of the most popular one. The virtual currency is supported by blockchain or a decentralized network.
Trading in electronic cash was gaining momentum in India before to the ban. The Supreme Court order is expected to revive trading and exchange of electronic cash. Crypto-currency companies are also likely to revive investment plans and expand their network.
However, banking sources said that the companies are set to wait and watch for some time before reviving their business plans in the country..