The Supreme Court has refused to overturn a Reserve Bank of India (RBI) ban on cryptocurrencies, making it impossible for the virtual currency players to carry out transactions through Indian banking and payment channels. A bench headed by Chief Justice Dipak Misra, refused to give interim relief to the RBI’s directive prohibiting banks, financial institutions and other regulated institutions from providing any services related to virtual currencies.

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Legal and tax experts believe that it will be quite difficult for cryptocurrency players to operate in the country after the RBI circular came into effect July 6.

In a circular dated April 6, RBI had said entities regulated by it have been prohibited 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”. Three months’ time was given to the entities already providing such services to stop their activity.

Harshal Kamdar, partner (tax & regulatory), PwC, said this makes it significantly difficult for crypto companies to operate in India or transact via India payment channels. “This is likely to add to the woes of this nascent and volatile sector. Woes will be largely due to lack of access to the Indian market,’’ he told DNA Money.

RBI told the apex court that cryptos cannot be treated as currency under the existing law that mandates coins to be made of metal or exist in physical form and stamped by the government. Khaitan & Co associate partner Rashmi Deshpande said cryptocurrency players were anxiously awaiting the verdict since their business will virtually come to a standstill on account of the circular.

“The choking of banking channels means that virtually all cryptocurrency related transactions will have to be done in cash or not at all,” she said.

Raj Nair, president, Indian Merchants Chamber, said the Supreme Court did well to disallow a plea for temporary stay of the RBI order because it does not have the technical wherewithal to understand the subject.

‘A few major scandals are waiting to happen, but cryptocurrencies will mature. The underlying blockchain technology has so many good applications other than cryptocurrency, hence blockchain technology will develop rapidly and contribute to more reliable cryptocurrencies being issued in the future,’’ he said.

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Rachit Sharma of Taxmann.com said bitcoin will further lose its shine post this refusal. “It would be the last opportunity for the investors to exit cryptocurrencies, book a loss and withdraw their funds,’’ he said.
K V Karthik, partner, Deloitte India, said, “This decision now will probably push the investors who have been sitting on the fence to now start withdrawing the funds before the window closes as per Reserve Bank of India circular.”

Source: DNA Money