India high court asks banking regulator for response to plea against blocking of cryptocurrency transactions
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India high court asks banking regulator for response to plea against blocking of cryptocurrency transactions

The Delhi High Court issued a notice Thursday asking the Reserve Bank of India (RBI), the National Payments Corporation of India (NPCI), and State Bank of India (SBI) to respond to a petition seeking revocation of the prohibition on using the Unified Payment Interface (UPI) System for cryptocurrency transactions in the country. The petition is filed by a retail investor in cryptocurrency who argues that the ban violates his fundamental rights to freedom of trade and equality under the Indian Constitution.

The UPI system is a real-time payment system developed by the NPCI for inter-bank peer-to-peer and person-to-merchant transactions. SBI, one of India’s largest public sector banks, blocked crypto exchanges from receiving funds using the UPI system in September this year. Previously, ICICI Bank and Paytm Payments bank also stopped payments to crypto exchanges, and several other banks warned customers against trading in cryptocurrency. The banks based their action on the 2018 circular issued by the RBI, India’s banking regulator, which had prohibited banks from dealing in virtual currencies due to “various risks” associated with them. This circular was later set aside by the Supreme Court in Internet and Mobile Association of India v Reserve Bank of India in March 2020.

In the petition before the Delhi High Court, the petitioner said the prohibition on using the UPI system by SBI forces customers to resort to other payment options, which are longer and costlier, making it difficult for users to get funds on time. He also argued that the action violated the top court’s order of March 2020.

The matter will be heard next on 24 December. Cryptocurrencies remain mostly unregulated in India, with unclear signaling by government officials towards banning or adopting an open approach. Many organizations such as the Internet and Mobile Association have called for the regulation of cryptocurrency instead of a blanket ban. While there are reports of a bill under wraps, there is no formal affirmation yet.