India’s crypto exchanges are reportedly mulling the legal route again — may approach the Supreme Court over RBI’s directive

• India’s crypto exchanges are reportedly considering going to court against the country’s central bank.
• But crypto exchanges may have an uphill battle, even with the SC ruling in their favour once.
• India is also considering a digital version of the rupee.

India’s cryptocurrency exchanges are reportedly planning to approach the country’s Supreme Court to resolve troubles they have had with banks recently. Almost every crypto exchange in the country has had to stop taking rupee deposits in the country, as banks withdrew their services, after an informal notice from the country’s central bank — the Reserve Bank of India — earlier this month.

According to a report by the Economic Times, the exchanges are now planning to approach the Supreme Court to find a solution. Their primary complaint is that the RBI’s directive, though informal, ignores the Supreme Court’s judgement from last year. The apex bank had quashed a ban imposed on financial entities in the country by the central bank, which stopped banks and other RBI regulated entities from working with crypto firms.

While banks stopped providing services to crypto firms around May 18, the exchanges could still pull through for a while using PayTM and other payment processing companies. This would allow users to deposit money to PayTM and transfer it to their exchange accounts. However, the IPO-bound payments app also stopped working with crypto exchanges last week, leaving them in the lurch.

“Unfortunately, this is an industry-wide issue and all Indian crypto exchanges are facing a limitation in rupee deposits right now. We are working on adding more banking partners to support the increasing volume of INR deposits," Nischal Shetty, CEO, WazirX, India’s top exchange, told Mint on May 18.

But adding banking partners is easier said than done. At the moment, with the lack of any firm regulation for cryptocurrencies in India, going to court may be the only way available to these exchanges. However, that could still be an uphill battle.

Banks, for instance, have the right to withdraw services from anyone whom they deem unreliable. Essentially, while the RBI directive may not be an official diktat, a bank can always say that the market seems too unsteady for it to lend to. The crypto exchanges, on the other hand, will have to argue and prove that such thinking is unfounded and discriminatory towards them. Given the current regulatory uncertainty in India, that may be an arduous path.

What would make things easier?

An actual legal diktat from the government is what the industry needs in order to clear things up. A possible crypto bill was expected in the Budget session of the Parliament earlier this year, but seems to have been put off. While Finance Minister Nirmala Sitharaman has said, on multiple occasions, that the government is considering its approach towards crypto right now, and doesn’t want to inhibit innovation, users and banks have been unclear on what the actual stance on these currencies remains.

Additionally, the RBI had also announced its plans to build a central bank digital currency (CBDC) for the rupee. This digital rupee could be one reason why the bank opposes cryptocurrencies in India.


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