Cryptocurrency firms look for a workaround after top court refuses to lift RBI ban

Companies dealing in cryptocurrencies are desperately aiming to work around the banking ban after the Supreme Court virtually confirmed their financial-pariah status by refusing to overturn the central bank’s clampdown.

The companies are promising effective workarounds to clients, such as escrow-fuelled transactions, crypto-to-crypto transfers, and even shifting of company base to another country. They are also pointing out loss of revenue to the government from the banking ban, in another effort to survive.

The Reserve Bank of India had announced the ban on 6 April, asking all lenders and financial institutions it regulates to stop providing any service to entities that deal in cryptocurrencies. The central bank had given the lenders three months—until 5 July—to wind up their ties with cryptocurrency firms.

However, some companies as well as the Internet and Mobile Association of India had approached the Supreme Court to challenge the RBI decision. On Tuesday, the apex court refused to provide any relief against the RBI ban, virtually outlawing cryptocurrency exchange firms. The association declined to comment on the development.

“The judgment is a dampener as we believe banking helps streamline the whole flow of money in and out of cryptocurrency,” said Nischal Shetty, founder and CEO of WazirX, an Indian cryptocurrency exchange firm. Cryptocurrency transactions also help the government mop up tax revenue, which it would lose now, he said.

Explaining the efforts WazirX is making to stay in business, Shetty said the company has introduced “WazirX P2P (peer to peer), where users can still cash in and cash out of cryptocurrency any time using escrow accounts”.

Ashish Singhal, co-founder and CEO of CoinSwitch.Co, a cryptocurrency exchange platform, offers more solutions to successfully deal with the banking ban. “Crypto-to-crypto transfers can work around the ban, although they would be limited in scope for exchanges. Other market players, especially blockchain businesses and initial coin offerings, may consider moving base to a different territory,” he said.

Shetty of WazirX is of the view there is regulatory uncertainty in the country with regard to the cryptocurrency market.

“Right now the entire cryptocurrency market sees about Rs 40 crore worth of trades per day. But this is due to the uncertainty around the regulation in the country. As soon as regulations come in, we will see this grow to Rs 400 crore and above per day,” he said.

Cryptocurrencies have been under official glare for quite some time.

Before imposing the ban in April, the RBI had warned users, holders and traders of cryptocurrencies in December regarding risks involved in dealing with virtual currencies. Then, in February, finance minister Arun Jaitley had said the government didn’t consider cryptocurrencies legal tender. The government even equated cryptocurrencies with Ponzi schemes.