- In response to a petition filed by the IAMAI over RBI’s decision to not allow regulated entities like banks to deal in cryptos, the central bank of India said it hadn’t banned crypto but ringfenced those entities from risks associated.
The Reserve Bank of India has said that it hadn’t banned the trading of digital currencies but only ringfenced regulated entities like banks and financial institutions from risks associated with trading such cryptocurrencies.
According to local reports, the copy of a 30-page affidavit that the RBI filed in the SC on Sep. 4, reads,
“Firstly, the RBI has not prohibited VCs (virtual currencies) in the country. The RBI has directed the entities regulated by it to not provide services to those persons or entities dealing in or settling VCs… The RBI has been able to ringfence the entities regulated by it from being involved in activities that pose reputational and financial risks along with other legal and operational risks.”
This has been in response to a petition filed by the Internet and Mobile Association of India (IAMAI), that wanted the central bank to reconsider its decision from 2018 circular directing regulated entities to not deal in cryptos.
IAMAI also approached the Supreme Court against the RBI’s action. In a hearing earlier this month, the association whose members include crypto exchanges argued that trading in cryptos was a legitimate business activity but RBI had effectively banned it by blocking access to banking channels. Crypto Kanoon tweeted,
The case is not likely to be heard today. We will soon confirm the next date of hearing.
— Crypto Kanoon (@cryptokanoon) January 21, 2020
The risks highlighted by the central bank in association with trading cryptos include money laundering and terror financials via digital currencies. The RBI said in its affidavit:
“Any possible avenues which facilitate anonymous cross-border fund transfer have to be acted upon swiftly and stringently dealt with. It is an admitted fact that VCs have been used to purchase illegal and illicit goods ranging from guns and ammunition to drugs”
The RBI has also said ICOs are prohibited and virtual currency asset funds not to be allowed to be set up or operated in India either. The central bank also wants to prevent and track remittances for investment in virtual currencies by enhancing its regulations regarding Foreign Exchange Management Act.
Like many other countries, the central bank of India also follows “blockchain, not bitcoin,” approach as RBI said it was not against the technological innovation and encouraged the,
“development and adoption of distributed ledger technology, also called blockchain technology.”