SUMMARY
The Supreme Court is yet to give its judgement on pending cryptocurrency cases
Zebpay's shutdown will significantly impact the Indian cryptocurrency market, as the exchange claimed to have the largest crypto users
The step is being seen as an indication that the SC judgement might go against cryptocurrency exchanges in India
Ahead of the Supreme Court’s decision in the crypto case, India’s leading cryptocurrency exchange operator Zebpay announced the shut down of its exchange operations, effective from 4 pm today (September 28).
After the RBI banned banks and payments wallets from extending their services to cryptocurrency entities, most exchanges, instead of shutting down their operations, had gone crypto-to-crypto. This included crypto exchanges Zebpay, Unocoin, and Koinex.
However, with most cryptocurrencies facing a death threat and the value of almost 800 of them having fallen to zero, Zebpay has now announced to shut down its crypto-to-crypto offerings as well.
In a statement issued on its blog, Zebpay said, “At this point, we are unable to find a reasonable way to conduct the cryptocurrency exchange business. As a result, we are stopping our exchange activities. At 4 pm today (September 28, 2018), we will cancel all unexecuted crypto-to-crypto orders and credit your crypto coins/tokens back to your Zebpay wallet. No new orders will be accepted until further notice.”
However, it added:
The Zebpay wallet will continue to work even after the exchange stops and one is free to deposit and withdraw coins/tokens into their wallet.
Speaking about the closure of the Zebpay exchange, Nischal Shetty, founder and CEO of WazirX, another crypto exchange, said, “While Zebpay has been a competitor, it’s unfortunate to see they’re shutting down their exchange. The crypto community needs to stay strong and to stick together. We need to keep the crypto fire burning in India. All Zebpay users are welcome to continue trading on WazirX.”
SC Decision Could Go Against Crypto Exchanges
The fact that Zebpay did not hang in there long enough for the Supreme Court’s decision on the crypto matter clearly indicates the possibility of the decision going against crypto exchanges — the RBI way.
The RBI, meanwhile, in its submission to the court, said that the petition challenging its circular dated April 6 is not maintainable either in law or on facts and, hence, liable to be dismissed as such.
The RBI asserted: “The impugned circular and the impugned statement neither violate the right to equality guaranteed under Article 14 or the right to trade and business guaranteed under Article 19 of the Constitution.” The RBI response added that “there is no statutory right, much less an infringed one, available to the petitioner to open and maintain bank accounts to trade, invest or deal in virtual currencies (VCs).”
“The petitioner cannot seek to exercise the extraordinary jurisdiction of this Court to avail a right which they do not have,” it said.
The multiple petitions filed against the RBI circular alleged that the ban it has imposed on banks barring them to deal with cryptocurrencies entities violates Articles 19 (1) (g) and 14 of the Indian Constitution and will lead to the closure of such companies.
The Curious Case Of Cryptocurrency In The Supreme Court
On July 20, a three-judge bench of the Supreme Court had ordered that all the cryptocurrency-related cases be clubbed and had finalised the next hearing for September 11.
However, interestingly, not all the cases are about the RBI banning banks from extending their services to cryptocurrency entities.
The first crypto case — Siddharth Dalmia and Vijay Pal Dalmia’s — actually talks about banning cryptocurrencies in India amid rising funding of terrorism and insurgency, illicit trade of arms and drugs, illicit investments, avoidance of banking channels etc.
Last year, Income Tax officials had also sent notices to over 100K HNIs investing in Bitcoin and other cryptocurrencies. The matter is now being investigated by the enforcement directorate, as the IT officials found that the HNIs hadn’t paid any tax over Bitcoin gain.
In its notification, cryptocurrency exchange Zebpay clarified, “Despite regulatory and banking problems along our journey, we continued to look for solutions as we did not want India to miss the bus of digital assets that power the public blockchain. However, the recent past has been extremely difficult. The curb on bank accounts has crippled our, and our customer’s, ability to transact business meaningfully.”
Meanwhile, the cryptocurrency case continues to be adjourned in the Supreme Court owing to the other cases. Being a regulatory affair, the ball is actually in the court of Subhash Chandra Garg, Secretary, Department of Economic Affairs, Ministry of Finance, who is heading the interdisciplinary committee on cryptocurrency and ICO matters. The committee was expected to submit its report earlier this month, but there is no update further on this development.
