Supreme Court quashes RBI banking ban on cryptocurrency

Mumbai: India's Supreme Court ruled on Wednesday to allow banks to handle cryptocurrency transactions from exchanges and traders, overturning a ban on such dealings by the central bank that had come as a major blow to the thriving industry.

The Reserve Bank of India had ordered financial institutions to break off all ties with individuals or businesses dealing in virtual currency such as Bitcoin within three months, in April 2018.

The ban led to plummeting trade volumes and exchanges shutting their businesses.

"Investments had stopped and start-ups 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," said Nischal Shetty, CEO of WazirX, an Indian cryptocurrency exchange.

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 finalse 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.