The apex court on Tuesday refused to stay a Reserve Bank circular prohibiting banks and financial institutions from providing services in relation to cryptocurrencies
In light of Supreme Court’s (SC) verdict on July 3, backing Reserve Bank of India’s (RBI) circular on cryptocurrencies, the latter is set to officially disappear from the radar.
The apex court on Tuesday refused to stay the RBI's circular prohibiting banks and financial institutions from providing services in relation to cryptocurrencies.
As per the April 6 circular, entities regulated by RBI are prohibited from providing any service in relation to virtual currencies, including those of transfer or receipt of money in accounts relating to the purchase or sale of virtual currencies.
Cryptocurrencies are digital currencies in which encryption techniques are used to regulate the generation of currency units and verify the transfer of funds. They operate independently of a central bank.
While the central bank did provide a 3-month window, if you still held the cryptocurrency thinking that a possible stay could boost its value, the verdict will be a tough pill to digest.
“The verdict implies that people cannot use banking channels to deal with the cryptocurrency after July 6 (the three-month deadline given by RBI). In the interim, one could still use the banking channel, but it would be tough to find a buyer when one knows that the channel will no longer accept cryptocurrencies,” Abhishek Rastogi, Partner, Khaitan and Co, said.
He was quick to add that it does not mean that the value of any cryptocurrencies you possess is zero. “It can still be used on a person-to-person basis for any goods and services offered.” For instance, a customer can buy a television set from a showroom which accepts payments in cryptocurrencies. Similarly, you can also accept payments via cryptocurrencies as well, but the bigger issue will be encashing this payment in rupee terms, which will need the intervention of banks.
The top court was hearing a plea filed by the Internet and Mobile Association of India seeking a stay on the RBI circular claiming it was 'arbitrary, unfair and unconstitutional'. The association had contended that the RBI circular has barred all entities regulated by the apex bank from providing services to any individual or business dealing in virtual currencies like cryptocurrencies.
“After the RBI circular, cryptocurrency players were sitting on a time bomb with banks and other regulated entities required to withdraw services for cryptocurrency-related transactions from July 6. With this in mind, the SC was asked to provide some ad-interim relief," Rashmi Deshpande, Advocate, Associate Partner at Khaitan & Co, said in a statement.
"Cryptocurrency players were anxiously awaiting the SC verdict since their business will virtually come to a standstill on account of the RBI circular. The restriction will kick-in from July 6 as envisaged in the circular. This is a big blow to trading platforms and individuals holding cryptocurrencies. The choking of banking channels means that virtually all cryptocurrency-related transactions will now have to be undertaken in cash.”
Experts such as Suresh Sadagopan, Founder of Ladder7 Financial Advisories, highlighted how there were warning signs about use of virtual currencies in general. "There were warning signs regarding this investment platform earlier as well, both from an investment and regulatory framework. While it is an alternative investment territory, it is rather an insane option for people to have invested so far." Also read: What glittered in 2017 was not Gold; Should you substitute it with Bitcoin?(With inputs from PTI)The Great Diwali Discount!
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