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Those dealing in cryptocurrency suffered a big setback today as the Supreme Court declined to offer interim relief on the RBI restrictions to this effect.
The April 6 circular by the central bank prohibits banks and financial institutions from providing any service in relation to virtual currencies such as 'cryptocurrencies'.
Under the circular, entities regulated by the RBI have been barred from "providing any service in relation to virtual currencies, including those of transfer or receipt of money in accounts relating to purchase or sale of virtual currencies".
The SC had earlier ruled that all cryptocurrency-related cases be clubbed together and fixed July 20, 2018, as the date for the hearing.
But the case was brought forward as an industry body said the RBI ban is set to come into effect this week.
Accepting the request, the SC had set the hearing for July 3.
Rashmi Deshpande, Advocate, Associate Partner at Khaitan Co, said, “The RBI restriction will kick in from July 6, 2018, as envisaged in the circular.
This is a big blow to not only cryptocurrency trading platforms, but also individuals holding cryptocurrency.
The choking of banking channels means that virtually all cryptocurrency related transactions will have to be done in cash or not at all.”
Crypto-currencies are digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.
If you are an investor in cryptocurrencies, you may soon have problems in exiting positions after July 5.
Zebpay, one of the biggest digital crypto-exchanges in India, has already asked its clients to withdraw their funds before the deadline expires.
The exchange in a circular said, “As per a recent RBI action, banks have been told to discontinue banking services to those dealing with virtual currencies.
While our industry is challenging this legally, the outcome is beyond our control.
Hence, if you are holding any rupees, or depositing any rupees in Zebpay, there could soon come a time when we may be not be able to honour withdrawal requests.
Please continue only if you understand this risk.”
A couple of cryptocurrency exchanges including BTCXIndia and Ethexindia halted their trading in March amongst fears of a crackdown.
