RBI Banking Ban Reversal: How India's Crypto Market Came Back to Life
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On March 4, 2020, India’s cryptocurrency market didn’t just breathe again-it exploded. After two years of being cut off from banks, exchanges like WazirX, CoinDCX, and ZebPay saw users flood back in. Trading volumes doubled within weeks. New investors signed up by the hundreds of thousands. It wasn’t a slow recovery. It was a reset. And it all happened because the Supreme Court of India overturned the Reserve Bank of India’s banking ban on crypto businesses.
What the RBI Actually Did in 2018
The RBI didn’t ban cryptocurrency. That’s a common mistake. What it did was ban banks from serving anyone who dealt with virtual currencies. That included exchanges, wallet providers, and even blockchain startups. The circular, issued on April 6, 2018, told every bank under its control: stop processing payments for crypto-related businesses. No deposits. No withdrawals. No merchant accounts. No payroll for crypto firms. The result? Exchanges couldn’t operate. Users couldn’t cash out. People who bought Bitcoin in 2017 found themselves stuck. Some platforms shut down. Others moved their operations to Singapore or Dubai. Fintech companies working on real blockchain projects-like supply chain tracking or land registry systems-got caught in the crossfire. They couldn’t open bank accounts either. Innovation froze. The RBI’s reasoning? Risk. They warned about price swings, fraud, money laundering, and the threat to India’s monetary system. Former Governor Shaktikanta Das called crypto a threat to financial stability. But here’s the problem: the RBI never showed any evidence that banks had actually lost money. No case of a bank being drained by crypto clients. No proof of systemic damage. Just fear.The Legal Fight That Changed Everything
A group of crypto businesses, backed by the Internet and Mobile Association of India, took the RBI to court. They argued the ban violated Article 19(1)(g) of the Indian Constitution-the right to carry on any trade or business. The Supreme Court didn’t just side with the crypto industry. It dismantled the RBI’s logic. Justice Rohinton Fali Nariman wrote that the ban was disproportionate. The RBI had used a sledgehammer when a scalpel would’ve worked. Instead of banning all crypto services, the RBI could’ve imposed KYC rules, transaction limits, or required exchanges to report suspicious activity-like it does with forex or stock trading. The court pointed out something simple: if no bank had been harmed, why shut them all down? The RBI had no data. No studies. No incident reports. Just assumptions. And under Indian constitutional law, that’s not enough to strip people of their right to earn a living. The ruling didn’t say crypto is legal tender. It didn’t say it’s safe. It just said: you can’t ban banks from serving legal businesses without proof of harm.What Happened After the Ruling
Within 48 hours of the judgment, WazirX reported a 300% spike in new user registrations. CoinDCX added 50,000 users in a single week. Bank accounts reopened. UPI payments resumed. People could finally move money in and out of crypto without jumping through hoops or using third-party intermediaries. By late 2020, India became the world’s second-largest market for peer-to-peer Bitcoin trading, behind only Nigeria. Local exchanges started offering rupee pairs for over 50 cryptocurrencies. Retail investors, many of them young and tech-savvy, began treating crypto like stocks-buying small amounts, holding long-term, and using it as a hedge against inflation. The RBI didn’t disappear. It kept warning. It kept calling crypto a “high-risk asset.” But now, it had to operate within the boundaries set by the Supreme Court. It couldn’t block banks anymore. So it tried something else: taxation.
The Tax Trap That Followed
In the 2022 Union Budget, the government slapped a 30% tax on all crypto gains. On top of that, a 1% TDS (Tax Deducted at Source) was added on every trade. No deductions. No losses allowed. Even if you bought Bitcoin at ₹5 lakh and sold it at ₹4 lakh, you still paid 1% TDS on the full sale amount. The idea? Discourage speculation. Generate revenue. But the effect was mixed. Trading volumes dipped slightly. But the market didn’t collapse. Why? Because the Supreme Court ruling still stood. Banking access was still legal. People still saw crypto as a store of value, especially with inflation hitting 6-7% annually. Unlike the banking ban, this tax didn’t stop people from trading-it just made them more careful. Many started using crypto as a long-term asset, holding for over a year to avoid short-term tax hits. Others shifted to decentralized exchanges to avoid TDS, though that came with new risks.Where Things Stand in 2025
As of November 2025, cryptocurrency is legal in India. You can buy, sell, hold, and trade it. You can open a bank account with a crypto exchange. You can even get a crypto-linked debit card from some fintech partners. But here’s the catch: crypto is not legal tender. You can’t pay your electricity bill in Bitcoin. You can’t buy groceries with Ethereum. The rupee still holds that exclusive status. So crypto functions purely as an investment asset-like gold or shares. The RBI still doesn’t like it. But it can’t stop it. The Supreme Court’s 2020 ruling is binding. Any future attempt to ban crypto again would require Parliament to pass a law-and even then, it would have to pass the test of proportionality. The courts won’t let regulators act on fear alone anymore. The government’s 2021 draft bill, which aimed to ban private crypto and launch a digital rupee, never became law. No version was tabled in Parliament. No vote was held. So the legal gray zone remains.
What This Means for Indian Crypto Users
If you’re an Indian investor today, here’s what you need to know:- You can legally trade crypto on Indian exchanges like CoinSwitch Kuber, ZebPay, or Bitbns.
- Your bank account won’t be frozen for holding Bitcoin.
- You must pay 30% tax on profits and 1% TDS on every trade.
- You cannot use crypto to pay for goods or services officially.
- If a crypto company goes under, you have no legal recourse under banking laws-crypto isn’t covered by deposit insurance.
Comments
Gavin Jones
November 16, 2025 AT 01:04What a monumental win for individual freedom in finance. The RBI’s ban was pure overreach-no data, no evidence, just fear-mongering. The Supreme Court didn’t just rule correctly, it reminded regulators that democracy isn’t about shutting down innovation because it’s unfamiliar. This is the kind of precedent that could ripple across the Global South.
Mauricio Picirillo
November 16, 2025 AT 12:27Bro. I bought my first BTC in 2019 while it was still banned. Had to use a friend’s PayPal to move money. Now I’m just chilling with my cold wallet and paying my rent in USDT. Life’s good. The tax sucks, but at least I’m not stuck in 2018 anymore.
Liz Watson
November 17, 2025 AT 21:21Oh wow. A whole article about how Indians got to keep their money. Shocking. Next up: the Supreme Court rules that breathing is a fundamental right. The RBI was just trying to protect people from themselves. You know, like how we protect people from buying energy drinks before noon.
Rachel Anderson
November 19, 2025 AT 09:52I cried. I literally cried when I read that the court ruled in favor of crypto. After two years of watching my friends lose everything, of seeing WazirX’s support tickets explode, of hearing my uncle say ‘crypto is a scam’ for the 47th time… this was justice. Not perfect. Not clean. But justice. And I’ll never forget it.
Hamish Britton
November 20, 2025 AT 14:45Interesting how the tax trap ended up being more effective than the banking ban. People didn’t leave-they adapted. Long-term holding, cold wallets, DEXs. It’s like the government tried to kill the plant but ended up pruning it. Now it’s stronger. Also, 1% TDS on every trade? That’s just a fee disguised as regulation. Not clever.
Robert Astel
November 21, 2025 AT 08:35you know what this reminds me of? when the internet was first banned in some countries because people were sharing files and then suddenly everyone realized that blocking access to information is like trying to stop the tide with a napkin and then the courts stepped in and said hey maybe we should let people use tech to make their lives better and not just because some banker got scared of a new word like blockchain and now we’re here and i think we’re on the cusp of something bigger than just crypto like maybe this is the first domino in a chain reaction where governments stop being scared of decentralization and start realizing that control is an illusion and that trust should be built in code not in boardrooms and also i think my cat just knocked over my coffee but that’s another story
Andrew Parker
November 21, 2025 AT 17:04THEY TOOK OUR FREEDOM... AND THEN GAVE IT BACK... BUT WITH TAXES... 😭💸
Can you believe it? After all we’ve been through? The sleepless nights? The panic sells? The midnight Reddit threads? The way we whispered ‘Bitcoin’ like it was a sacred word? And now... they slap a 30% tax on our dreams? I mean... is this justice? Or is this just the system co-opting rebellion? I’m not mad... I’m just... disappointed. 🤕
Kevin Hayes
November 22, 2025 AT 07:06The Supreme Court’s ruling was not a victory for cryptocurrency per se, but for the principle of proportionality in administrative law. The RBI’s circular failed the doctrine of reasonable classification and violated the test of necessity under Article 19(1)(g). The absence of empirical harm rendered the restriction arbitrary. This is not crypto advocacy-it’s constitutional jurisprudence at its finest. Any future regulatory attempt must satisfy the same burden of proof. The bar is now set.
Katherine Wagner
November 23, 2025 AT 04:52taxes bad
ban good
but court said no
so now we have both
which is worse
idk
but i still buy
because why not
ratheesh chandran
November 24, 2025 AT 14:31india is going to be the next crypto superpower dont you see it? we have the youth, the tech, the hunger… and the rbi? they are like a old man trying to stop a train with his hands. we dont need permission to be free. we just need internet. and we got it. and now we got the law on our side. 1.4 billion people… imagine that power. the world is watching. and we are not stopping.
Hannah Kleyn
November 25, 2025 AT 01:33I’ve been watching this whole thing from the sidelines. I didn’t trade. I didn’t even buy any crypto until last year. But what struck me was how the banking ban affected people who weren’t even into crypto-like those blockchain startups trying to digitize land records in rural areas. They couldn’t get paid. Couldn’t pay their devs. Couldn’t even open a bank account. So it wasn’t just about speculation. It was about infrastructure. And the court saw that. That’s rare. Most rulings are about money. This one was about possibility.
gary buena
November 26, 2025 AT 11:24haha the rbi is like that one uncle who says ‘i dont understand it so it must be fake’ and then the court goes ‘bro you have zero proof’ and now everyone’s like ‘ok fine you can have your crypto but pay 30% tax on your dreams’ 😂 i mean… it’s still better than being stuck in 2019 right? i’d rather pay tax than be broke with no way out
Albert Melkonian
November 27, 2025 AT 13:11This is a landmark moment in financial sovereignty. The Supreme Court affirmed that economic liberty cannot be suspended on the basis of speculative risk. The RBI’s failure to provide quantifiable harm rendered its action unconstitutional. This sets a critical precedent for regulatory bodies worldwide: innovation must be regulated, not prohibited. The tax regime remains problematic, but it is a fiscal tool-not a structural barrier. The door is open. The question now is whether institutions will step up to build guardrails, or continue to react with fear.
Kelly McSwiggan
November 29, 2025 AT 05:26So let me get this straight. The government bans banks from serving crypto firms. Then the court says ‘nope, that’s illegal.’ So now they slap on a 30% tax and 1% TDS to make it painful enough that only the die-hards stay. Brilliant. The RBI didn’t lose. They just upgraded from a sledgehammer to a tax hammer. And we’re supposed to be grateful? Congrats. You turned a financial revolution into a compliance nightmare.
Byron Kelleher
November 30, 2025 AT 11:03just wanted to say-this is why i believe in people. not governments. not banks. not regulators. people. when the system tried to lock us out, we found a way. we built tools. we moved money. we kept going. and when the court finally listened? it wasn’t because of lobbyists. it was because millions of ordinary folks refused to be silenced. that’s the real win. keep going. keep learning. keep holding.
Cherbey Gift
December 1, 2025 AT 00:17in nigeria we had the same thing-banks blocked crypto, people cried, then they said ‘fine, we’ll use P2P’ and now we trade more than anyone else. india? you’re not alone. we’re all just trying to get our money out of the hands of people who think they own it. and guess what? we’re winning. the old system is cracking. and we’re the ones holding the hammer. 🤝🌍
Anthony Forsythe
December 1, 2025 AT 02:29There’s a quiet revolution happening here-one that doesn’t scream on Twitter, doesn’t have a whitepaper, doesn’t need a CEO. It’s happening in the quiet kitchens of Bangalore, the college dorms of Pune, the tiny shops of Jaipur, where a 19-year-old buys 0.001 BTC with their pocket money, and their grandmother asks, ‘Is this safe?’ and they say, ‘Yes. It’s mine.’ That’s the real victory. Not the court ruling. Not the trading volume. It’s the moment when a generation decided that their money, their future, their choice… belongs to them. And no circular, no tax, no regulator can take that back. Not anymore.