Lifting of ban to provide fresh lease of life to exchanges

Hyderabad: Supreme Court's move to revoke RBI's ban on banks providing services to crypto exchanges & trading between "crypto to fiat" pairs is a welcome move, but it's not final point of arrival for crypto world, said a senior executive from TechMahindra.

"Lifting of ban will provide a fresh lease of life to exchanges in India like Zebapy who took a severe beating. Many like Coinome, Billdesk venture, who have suspended operations may revive. I personally know many entrepreneurs who had a tough time shifting their operations to crypto safe havens like Zug, Malta, Singapore. All these operations may return back to India,"

Rajesh Dhuddu, Global Practice Leader, Blockchain, TechMahindra, told The Hans India.

"While this augurs well for innovation and crypto trading, it doesn't create a long-term sustainable value by itself. Some people will make money in trading and lot more will lose. 'Fear of Missing Out (FOMO) will trigger hyper trading. However, real value will accrue only when acceptance of crypto is created along lines outlined by Satoshi, original creator, in his paper "Peer to Peer Electronic Cash System", he added.

Cryptos are most ideal for small merchant's payment acceptance on internet dis-intermediating banks, peer to peer payments & payments for micro transactions (machine 2 machine, machine 2 merchant). The Supreme Court on Wednesday allowed a plea challenging the Reserve Bank of India's (RBI's) 2018 circular which barred banks from trading in cryptocurrencies. "Trading in cryptocurrencies now will be allowed," the top court noted.

In April 2018, the RBI had issued a circular barring banking and financial services from dealing in virtual currency or cryptocurrency such as Bitcoin, most valued cryptocurrency in the world. Cryptocurrencies are digital currencies in which encryption techniques are used to regulate the generation of currency units and verify the transfer of funds, operating independently of a central bank.

The RBI had stated that virtual currencies (VCs) (cryptocurrencies and crypto assets) "raise concerns of consumer protection, market integrity and money laundering." In view of the associated risks, banks were asked not to deal with crypto-related currencies.

The circular was challenged by an industry group Internet and Mobile Association of India (IMAI) before the SC.

"Investments had stopped and startups were staying away from starting business in the crypto and blockchain space in India which will change now that the Supreme Court has said that the RBI circular was unconstitutional," Nischal Shetty, CEO of WazirX, an Indian cryptocurrency exchange, said.

However, the industry still faces hurdles as a government panel, appointed to look into the matter, has recommended that India ought to ban all private cryptocurrencies. In July, the panel also recommended a jail term of up to 10 years and heavy fines for anyone dealing in digital currencies.

The government though is yet to act on these recommendations and is yet to finalise regulations around cryptocurrencies. On several occasions, the government along with the central bank, had cautioned the public about the risks of cryptocurrencies. If the government follows the panel's recommendations, it could signal the end of the road for these digital currencies in India.