During a hearing on Monday (Feb 25) the Supreme Court of India gave the government just four weeks to release a regulatory framework for cryptocurrencies, threatening to deliver its own judgment on the issue if the deadline is not met.
Four weeks is not much time when it comes to forming new laws, especially in such a contested sphere as cryptocurrency regulation, but this John Grisham-worthy legal thriller has been in the making for much longer. So how did we get here?
RBI: ‘You Shall Not Mingle with Crypto-Services’
It all begins with the Reserve Bank of India (RBI) – the country’s central bank – and it’s April 2018 decision to bar all RBI-regulated entities from dealing or providing services to individuals or businesses dealing with cryptocurrencies.
“Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs. Regulated entities which already provide such services shall exit the relationship within a specified time,” read RBI’s statement on the matter.
The RBI had issued warnings on the perceived dangers of cryptos, with the first one released way back in 2013 listing a slew of risks faced by users of “virtual currencies” (exemplified in the statement by, among others, dogecoin):
• The risk of getting hacked, attacked by malware or losing a crypto-wallet password.
• Lack of customer protection due to lack of regulation.
• Speculative nature and high volatility of cryptocurrency value.
• Use of crypto for illegal activities and in breaching anti-money laundering laws.
• Use of cryptocurrencies from platforms set up in a jurisdiction with unclear legal status.
Two more RBI warnings followed in February and December of 2017: “The Reserve Bank of India advises that it has not given any license/authorization to any entity/company to operate such schemes or deal with Bitcoin or any virtual currency. As such, any user, holder, investor, trader, etc. dealing with Virtual Currencies will be doing so at their own risk,” cautioned the former, while the latter reaffirmed that “in the wake of significant spurt in the valuation of many VCs and rapid growth in Initial Coin Offerings (ICOs), RBI reiterates the concerns conveyed in the earlier press releases.”
Naturally, the RBI’s warnings did not appear out of the blue, they were on one hand triggered by the rapid growth of the cryptocurrency industry, and on the other, by a number of petitions filed with the Supreme Court of India regarding the legal status of cryptoassets in the country. In the end, however, it was the RBI who made its stance on cryptos clear, with the ban on cryptocurrency-related dealings mentioned above.
Crypto Industry: ‘Stop Killing Our Business!’
The reaction of the Indian cryptocurrency industry to the RBI’s decision was swift and largely negative, with a slew of petitions against the ban filed with the courts. The first petition, filed in April 2018 with the Delhi High Court by Kali Digital Eco Systems (an Ahmedabad-based firm behind the CoinRecoil exchange) alleged that the RBI’s circular is a violation of the Indian Constitution, namely Articles 19 (1) (g) and 14, referring to citizens’ rights to practice any profession, trade or business with equality before the law and without discrimination.
“On account of the Impugned Circular, the Petitioner will not be able to avail banking services to operate the cryptocurrency exchange ‘CoinRecoil.’ Such banking services are imperative for the business of the Petitioner. Consequently, the business of the Petitioner is stillborn on account of the Impugned Circular,” read the petition.
However, this and other petitions failed to reverse the ban which kicked into life on July 6, 2018. A Supreme Court petition to grant interim relief to those affected by RBI’s decision was also met with a refusal.
In response to a growing number of petitions filed against the RBI’s circular, the Supreme Court decided to hold a hearing, first slated for July 2018, later postponed to September and finally held in October, when the Supreme Court requested the government to clarify its stance on cryptocurrency regulation…within two weeks.
Supreme Court: ‘Make Up Your Mind!’
It seems that as of February 25, the Supreme Court of India has lost its patience (again) resulting in a four-week ultimatum for the government to make up its mind on cryptos. But without even a clear timeline of the introduction of said regulations, not to mention details of what they actually might be, it seems unlikely that the deadline will be met.