The Supreme Court has quashed RBI's order banning financial services firms from trading in virtual or crpytocurrencies. (Photo: Reuters)

The Supreme Court on Wednesday quashed an order by the Reserve bank of India (RBI) banning financial services firms from trading in virtual currency or cryptocurrency.

Its decision comes after hearing several petitions challenging RBI's April 2018 order imposing a ban on financial firms or individuals in India from trading in cryptocurrencies.

The development comes almost two years after trading in virtual currency was banned by RBI. While the order revoked the ban on illegal cryptocurrency trade, it is worth noting that the government already prepared a draft bill that seeks to prohibit mining, holding, selling, trade, issuance, disposal or use of cryptocurrency in the country.

It is worth mentioning that under the draft bill, all the aforementioned activities can be punished with a fine or imprisonment up to 10 years, or both in some cases.

The draft bill was prepared by a government panel which also called for the launch of an official government-backed digital currency in India to function like banknotes, to be issued through the Reserve Bank of India (RBI).

Meanwhile, there continues to be global uncertainty on virtual currency trade, especially with regulatory issues.

The Indian government has issued repeated warnings against investing in digital currencies, saying these were like Ponzi schemes that offer unusually high returns to early investors.

The government panel, headed by the then finance secretary Subhash Chandra Garg, recommended a fine of up to 250 million rupees ($3.63 million) and imprisonment for up to 10 years for anyone who mines, generates, holds, sells, transfers or issues cryptocurrency.

There is no underlying intrinsic value of these private cryptocurrencies, the panel said in its report submitted to the finance ministry.

(With inputs from Reuters)