On Wednesday, 4th March 2020, India’s Supreme Court has finally lifted the two-year ban on cryptocurrency trading, something that is a considerably historic moment for digital currencies.
In early 2018, the Indian government stated that it does not recognize cryptocurrencies as legal tender. The Indian politician and minister of finance at the time, Arun Jaitley, has mentioned that the government would work relentlessly to stop the use of Bitcoin as well as other cryptocurrencies in India.
“The government does not recognize cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payments system,” – Arun Jaitley.
In April 2018, banks were asked to cease cryptocurrency transactions, which caused frustration and dissatisfaction among cryptocurrency exchanges. While holding the currencies was still allowed, transacting with them was not. The Reserve Bank of India (RBI) stated that it has “directed the entities regulated by it to not provide services to those persons or entities dealing in or settling VCs.”
The ban immediately affected the cryptocurrency business in India, even causing large cryptocurrency exchanges like Zebpay to relocate. Once the ban was enforced, regulated entities had just three months to stop providing services involving cryptocurrency trading. The Internet and Mobile Association that was representing various crypto exchanges immediately argued this and challenged the RBI in court.
For months leading to the implementation of the ban, the RBI expressed its worry over Bitcoin and other digital currencies, even called them a ‘Ponzi scheme.’
There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes which can result in sudden and prolonged crash exposing investors, especially retail consumers losing their hard-earned money,” the ministry had stated, “Consumers need to be alert and extremely cautious to avoid getting trapped in such Ponzi schemes.”
The RBI argued that cryptocurrency could not be treated like a real currency as it does not exist in physical form, is decentralized, and is not regulated by governments. Much to their disappointment and disapproval, cryptocurrency exchange platforms had to halt all deposits and withdrawal in Indian Rupees. But in 2020, the ban has now been eliminated.
The Supreme Court stated that the RBI’s ban is “disproportionate” and that it “rules curb on cryptocurrency trade illegal,” thus removing the ban on trading Bitcoin as well as other digital currencies. Investors consider the court’s ruling as a “historic” moment for cryptocurrencies and that now the country can “participate in the Blockchain revolution.”
Top crypto exchange services celebrated the lift of the ban on Twitter. The ban was continuously criticized for being an uneducated decision taken by the RBI. There was even a rumor that the government was considering a 10-year prison sentence for anyone who owned ‘non-sovereign’ cryptocurrencies.
The Indian government was not alone in its reservations against cryptocurrencies; China, which is home to a large number of Bitcoin miners, has also banned financial institutions from facilitating bitcoin transactions and has closed down many Bitcoin mining operations. Despite the bans, cryptocurrencies remain a digital asset that more and more investors are choosing over gold and other commodities. With the fluctuating price of BTC and its upcoming halving in May 2020, all we are left to do is speculate and see where BTC will take us next.