April 2018: the banking ban
On 6 April 2018 the Reserve Bank of India issued a circular directing the banks and other entities it regulates not to deal in virtual currencies or provide services to anyone who does, and to end existing relationships within three months. Indian exchanges could no longer move rupees through the banking system. Many exchanges struggled to stay open. Unocoin, which had operated since 2013, stayed and fought.
Source: RBI circular, 6 April 2018.
2018 to 2020: the case
The Internet and Mobile Association of India (IAMAI) challenged the circular in the Supreme Court, and other petitioners and crypto businesses joined the fight. Unocoin was part of the case that challenged the ban. The question was not whether crypto should be regulated. It was whether a total banking cut-off was a proportionate response when no harm to regulated entities had been shown.
4 March 2020: the judgment
In Internet and Mobile Association of India v. Reserve Bank of India, a three-judge bench set aside the circular. The Court accepted that the RBI has power to regulate in this area, but held that the measure failed the test of proportionality under the right to carry on a trade or business, because the RBI could not show that crypto activity had caused harm to the entities it regulates. Banks could serve crypto businesses again.
What the judgment did not do: it did not make crypto legal tender, and it did not create a regulatory framework. That came through tax and anti-money-laundering law.
Source: The judgment, on Indian Kanoon.
After the judgment
- 2022: the Finance Act 2022 introduced a flat 30% tax on VDA gains and a 1% TDS. See the tax guide.
- March 2023: VDA service providers were brought under the Prevention of Money Laundering Act and must register with FIU-IND. Unocoin is registered. See Is Unocoin safe?.
Why this matters when you pick a platform
A platform that was operating in 2013, kept going through the 2018 banking ban, and took part in the case that overturned it has a track record you can read in public documents. A track record is not a guarantee. Crypto remains unregulated as an asset class in India and carries real risk. It is one of several things worth checking.
Common questions
Did the Supreme Court make Bitcoin legal in India?
It set aside the RBI's 2018 banking ban on 4 March 2020. It did not make crypto legal tender or create a regulatory framework. Buying, holding and selling Bitcoin is not banned.
What was the case called?
Internet and Mobile Association of India v. Reserve Bank of India, decided on 4 March 2020.
Risk: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Everything here is education, not investment, tax or legal advice.