Cryptocurrencies Not Banned In India, RBI Tells SC

The Reserve Bank of India (RBI) stated in an affidavit to the Supreme Court of India that it has not banned cryptocurrencies like Bitcoin.

The RBI has claimed that it has merely “ring-fenced” regulated entities from associated risks, according to its affidavit which was filed with the Supreme Court in response to a petition filed by the Internet and Mobile Association of India (IAMAI).

The RBI stated that only regulated entities like banks have been “ring-fenced” from risks such as terror financing and money laundering through cryptocurrencies, the RBI affidavit stated, clarifying that it is not against technological innovation.

Earlier, the IAMAI had filed a petition before the Supreme Court objecting to a 2018 RBI circular which had stopped regulated entities from dealing in cryptocurrencies.

The RBI filed its 30-page affidavit with the SC in September 2019, in response to the IAMAI petition.

Incidentally, during an earlier hearing earlier in January 2020, the RBI had claimed that the move had effectively banned legitimate business activity through virtual currencies.

The next hearing is scheduled for January 21.

The RBI affidavit stated, “RBI has not prohibited virtual currencies in the country. It has directed the entities regulated by it to not provide services to those persons or entities dealing in or settling virtual currencies. The RBI has been able to ring-fence entities regulated by it from being involved in activities that pose reputational and financial risks along with other legal and operational risks”.

The RBI affidavit stated that in discussions with the government, it had recommended prohibiting initial coin offerings (ICO) and virtual currency asset funds within India. Other suggestions included an enhanced Foreign Exchange Management Act to trace virtual currency-based investments under the Liberalized Remittance Scheme, which allows Indians to send USD 250,000 abroad in a year.