India Supreme Court: Cryptocurrency “ban” will continue
Cryptocurrency might be out, but India's exchanges still have new developments to look forward to.
India's cyptocurrency ban was never a crypto ban per se, but functionally took the form of barring regulated financial institutions in India from dealing with cryptocurrency exchange clients. The exact words were "entities regulated by RBI [the Reserve Bank of India] shall not deal with or provide services to any individual or business entities dealing with or settling VCs [virtual currencies]".
The RBI described it as a "ring fencing" to snip the ties between cryptocurrency exchanges and the traditional financial system, with the intention of starving it out of existence. The order gave exchanges three months to cut their ties, and came into effect almost exactly three months ago.
In response the exchanges launched legal action against the RBI, claiming that they were being unconstitutionally deprived of their right to do business. The dispute went to the supreme court, which set a hearing date for 20 July, weeks after the ban was set to come into effect.
The exchanges weren't thrilled with a hearing only happening after the ban is implemented, and petitioned the Supreme Court to push the date forward. It agreed, and a rushed hearing took place on 3 July, in which the ring fencing order was upheld.
That's where the situation stands right now. Cryptocurrencies aren't banned, but exchanges are unable to access licensed banking services. It's not necessarily permanent though, and exchanges are optimistically looking forward to a few dates in the near future.
What's next for India's exchanges?
Exchanges can't provide fiat to crypto services, but crypto to crypto platforms can continue operating as usual. The peer to peer cryptocurrency markets will likely remain as accessible as ever, given their detachment from licensed banking.
LocalBitcoins, one of the more widely used peer to peer bitcoin services, is showing relatively consistent volumes over the last few weeks of a fairly modest US$1 million worth of trades per week, so it might be worth paying attention to any shifts in the coming weeks to get a sense of whether bitcoin demand in India is going untapped by the RBI's order.
India's department of economic affairs is also deeply involved in cryptocurrency right now, and working on putting together a comprehensive set of regulations around cryptocurrency, or "crypto assets" as India's preferred nomenclature goes.
This distinction, and the nature of the RBI's disagreements with cryptocurrency exchanges, might point at the likely outcome being a defined distinction between cryptocurrencies, utility tokens and other digital assets.
India has been formally making concerted efforts to implement blockchain systems on a wide scale, and all signs so far point to digital assets, if not cryptocurrencies as such, as being right up its alley. India's cryptocurrency exchanges might be out of luck for now, but they probably have a role to play in the near future as tightly regulated digital asset platforms.
At the same time, India's department of economic affairs is working on a set of formal guidelines for crypto assets, which is set to be completed sometime in the first couple of weeks of July.
There's a lot more going on in India than the words "crypto ban" would suggest, but only time will tell how it all shakes out. India is a whopping crypto market so it might be worth paying attention to developments and looking at which types of crypto assets are and aren't going to be allowed on the regulated market.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, NANO