Tanvi Ratna is the founder and CEO of Policy 4.0 and works actively with policymakers in India on blockchain initiatives. She was formerly blockchain lead at EY India and a fellow on cryptocurrency regulation at the New America Foundation.
Industry watchers cheered on March 6 when the Supreme Court of India struck down the Reserve Bank of India’s (RBI) ban on financial institutions providing banking services to cryptocurrency businesses. However, the decision is not final, and embedded in the text of the judgment are multiple red flags.
In addition, a draft bill to ban cryptocurrencies, released on Feb. 28, 2019, could still move through Parliament. As analyzed by me previously, taken together, the partial court victory and the possibility of legislation moving forward mean that crypto’s legal status in India remains vulnerable.
The fine print
A review of the 180-page judgment reveals the premises of the verdict are not in alignment with what the industry has assumed.
In essence, the entire verdict hinges on the violation of one of the fundamental rights of the Indian constitution – Article 19 (1) (g), which guarantees the freedom to practice any profession. The Supreme Court concluded the RBI’s measure violated Article 19 (1) (g) for virtual currency exchanges, and that the prohibition measure was not proportional to the threat. The verdict also concluded the central bank had not substantiated the threat with empirical data or credibly examined alternative measures.
However, one of the reasons the Supreme Court supported the industry was because there was “no law banning virtual currencies yet,” which implies the verdict would not stand once there is such a law.
The court also referred to cryptocurrencies as a “by-product” of blockchain technology and said the government could separate the two. This refrain of segregating blockchain and crypto has been the premise behind most federal policy to date.
In a detailed post-verdict analysis, I go over specific…