Earlier this month, India’s Supreme Court delivered its verdict in a landmark case that promised to usher in a bullish era for cryptocurrency in the country.
The Court ruled to overturn a circular from the Reserve Bank of India (RBI) — issued back in April 2018 — which had banned banks’ services to all crypto-related firms.
Not all banks, however, appear to be complying with the ruling.
On March 12, fintech lawyer Mohammed Danish filed a representation with the central bank against the “arbitrary denial” of certain domestic banks to provide services in support of the sale or purchase of crypto assets.
Together with Kashif Raza, Danish is co-founder of the Indian crypto regulatory news and analysis platform Crypto Kanoon, and specializes in litigation and advisory services for blockchain and cryptocurrency.
Banks’ grounds for refusal holds no validity
RBI’s April 2018 prohibition had directed all its regulated entities not to deal in cryptocurrencies or provide services to any individual or company dealing with the asset class.
This ban was set aside by the Supreme Court “in its entirety,” Danish stated, and yet several cases have been reported where banks are continuing to decline to process crypto-related transactions — including HDFC and IndusInd Bank. Danish writes:
“In most of the cases, the banks have not given any written communication but verbally informed their customers that they are waiting for RBI notification in this regard.”
Danish adds that “it is pertinent to note” that, following its pro-crypto ruling on March 3, the Supreme Court gave no specific direction to RBI to notify banks and request their compliance with the Court’s order.
Yet given the unanimous ruling against RBI by three bench justices, Danish writes:
“Banks’ refusal to provide services for the sale/purchase of crypto assets is absolutely illegal, unjust and arbitrary in the eyes of the law and the same amounts to wilful disobedience to the order of the Hon’ble Supreme Court.”
RBI’s regulated entities must comply with the court order and provide banking services impartially as they provide them for all other legitimate transactions, Danish adds.
The letter requests that RBI issues official communication to all banks as soon as possible to ensure their compliance with the law.
Reasons for RBI’s dither and delay
RBI’s lack of coordination with institutions under its authority could be explained by reports that it is, in fact, planning to appeal the court’s ruling.
On March 6, just days after the judgment, a report from India’s The Economic Times cited unnamed sources with apparent knowledge of the matter, who claimed that RBI planned to file a review petition against the court’s quashing of its circular.
Moreover, it remains to be seen whether the Indian government will act to introduce a bill that had been postponed during parliament’s 2019 winter session, which would potentially impose a blanket ban on the use of crypto in India.
