Cryptocurrency Bourses Win India Case Against Central Bank Curbs

(Bloomberg) -- Cryptocurrency exchanges scored a victory in India after the nation's Supreme Court endorsed their stand against curbs put in place by the central bank that effectively outlawed virtual currencies in Asia's third-largest economy.

A three-judge bench headed by Justice Rohinton F. Nariman agreed with petitions by cryptocurrency exchanges, start ups and industry bodies that had challenged the Reserve Bank of India's April 2018 decision to ban banks from offering any services to support digital currencies. The court struck down the RBI's curbs on Wednesday.

The ruling is an opportunity for virtual currency investors and businesses in India to push against stricter rules being planned by a skeptical government, and potentially raises hope for projects such as Facebook Inc.'s Libra cryptocurrency. The Supreme Court is separately hearing another case, in which it will decide on regulations for digital currencies, and Wednesday's judgment weakens the case for strict norms.

Read: How to Lose $3.2 Billion of Bitcoin From India to Texas

“Cryptocurrencies are an exciting technology that needs to be carefully studied,” said Vaibhav Kakkar, a partner at law firm L&L Partners. “With this order, there is a likelihood of more mature and balanced regulation of cryptocurrencies and the fintech sector as a whole.”

Meanwhile, the Indian central bank has been exploring the creation of a sovereign-backed digital currency even as it escalated its crackdown on private instruments like bitcoin, citing the potential for money laundering and other illegal activities. The RBI didn't immediately respond to a request for comment.

Facebook's Libra, which is facing push back from regulators across the world, will be counting on continued explosive growth from emerging markets and especially India to succeed, Jefferies Financial Group Inc. said last year. The social media giant's users in India have doubled since 2015 to about 310 million and are forecast to surge to around 440 million by 2023, Jefferies analysts led by Sean Darby said.

Read: Facebook Weighs Libra Revamp to Address Regulatory Concerns

Opponents of the Indian central bank's curbs argued that the central bank wasn't empowered to issue the ban and its directive hadn't adequately studied the matter.

Kunal Barchha, co-founder of CoinRecoil.com, said his cryptocurrency exchange will now approach a couple of potential investors who had initially been lined up for funding but backed off after the RBI's ban.

“Now crypto traders, investors, miners, can proudly speak up about what they do for a living,” Barchha said. “Now they won't be judged as criminals.”

--With assistance from Rahul Satija.

To contact the reporter on this story: Upmanyu Trivedi in New Delhi at utrivedi2@bloomberg.net

To contact the editors responsible for this story: Unni Krishnan at ukrishnan2@bloomberg.net, Jeanette Rodrigues, Arijit Ghosh

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