The ban on banks in India dealing cryptocurrencies will go ahead after a legal challenge failed in the courts.
Judges in the Indian Supreme Court upheld the ban put in place by the country’s central bank, the Reserve Bank of India (RBI).
The RBI announced the policy in April against howls of protest from the financial sector.
Banks have had orders to close any accounts held by cryptocurrency exchanges or traders by July 6.
Several Indian exchanges protesting the ban headed by trade body the Internet and Mobile Association of India (IAMAI) took the matter to the courts for a legal review.
The supreme court said that the RBI’s ban on providing services to companies involved with digital currencies will “remain implemented.”
Legal tender argument
The central bank told the court that Bitcoin and other cryptocurrencies cannot be treated as currency under India’s existing law that orders coins must be made of metal or exist in physical form and stamped by the government.
The argument will go back before the court on July 20.
Legally, cryptocurrencies still face a ban and the hearing reinforces the statements by Finance Minister Arun Jaitley, who confirmed the government did not consider cryptocurrency legal tender in his Budget speech.
Traders and exchanges are exploring ways to stay in business if they lose the second round in the supreme court.
Regulation on the way
Most are looking at crypto-to-crypto trading instead of crypto-to-currency trading, which avoids the issue of whether a coin or token is legal tender.
The RBI and Indian government are also considering draft regulations for the cryptocurrency sector, although no details have been published.
The IAMAI has offered the RBI a detailed explanation of blockchain and how cryptocurrencies work to see the ban lifted.
“We do not know how long it will take for the regulations to firm up. If someone believes in the underlying technology of crypto and the long-term potential, they can stay invested. We feel like many other countries, India will also bring in regulations eventually,” said Ashish Singhal, CEO of CoinSwitch, an exchange aggregator.
Nevertheless, the cryptocurrency sector in India remains in disarray and is likely to do so to at least the next court hearing.