By Josiah Wilmoth
India’s cryptocurrency exchanges are mulling whether to challenge the central bank’s recent crackdown on domestic companies that allow customers to trade cryptocurrencies.
On April 5, the Reserve Bank of India (RBI) adopted a new policy barring regulated financial institutions from serving cryptocurrency exchanges. Under the new rule, lenders may no longer offer new loans to exchanges, and all existing business relationships must be sunsetted by the end of a three-month deadline.
While the policy does not make cryptocurrency trading or usage illegal, it does make it very difficult — perhaps impossible — for exchanges to offer trading pairs against the Indian Rupee (INR).
That’s why some exchanges are exploring whether they have a viable legal case against the RBI. If so, they may decide to file a petition with India’s supreme court.
“We are looking at filing a petition to challenge the RBI’s order. At the moment we are working on it and trying to figure out if we should get together with the other exchanges and do it collectively,” the head of an unnamed virtual currency exchange told Quartz.
If the exchanges do file a petition, it will likely be on the grounds that since trading itself has not been banned, the RBI cannot adopt policies that effectively prevent exchanges from offering that service.
“It has come with this overarching order that can be challenged on several counts,” added Anirudh Rastogi, a partner at law firm TRA, which represents several bitcoin exchanges in the country. “There is a right to trade and it cannot be restricted in absolute terms. Only reasonable restrictions can be imposed and applied but a complete prohibition as restrictive as this was unnecessary.”
In the meantime, the ban is likely to lead to an uptick in trading volume on peer-to-peer (P2P) trading platforms. LocalBitcoins — perhaps the most well-known P2P bitcoin trading platform — currently sees approximately $1 million worth of INR/BTC volume on a weekly basis.
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Featured Image Source: AP Photo/Rafiq Maqbool