The Economic Times report that the Reserve Bank of India (RBI), the nation’s central bank, has confirmed they have not banned cryptocurrencies within the country but admitted they had protected regulated entities such as commercial banks from the “risks associated with trading of such virtual instruments.”
.@RBI has said it had not banned cryptocurrencies such as #Bitcoin in #India, but only ring-fenced regulated entities like banks from risks associated with trading of such virtual instruments https://t.co/4yJbCYGVg0
— Economic Times (@EconomicTimes) January 21, 2020
The RBI was prompted to clarify its stance on digital assets by a petition filed by the Internet and Mobile Association of India (IAMAI) who had seen the effect of the central bank’s circular ordering regulated entities not to engage in cryptocurrency activity.
Banning Legitimate Business Activity
While individual citizens were vocal in their protests at having bank accounts terminated for buying cryptocurrency, the IAMAI took a step further and approached the Supreme Court to rule on the RBI’s action as they considered it unlawful to effectively ban legitimate business activity.
Formed in 2004 and based in Mumbai, the IAMAI is not-for-profit industry body whose Executive and Governing Councils include representatives of substantial companies from India and international operators such as Amazon, Airbnb, Facebook, Google, Netflix, PayPal, and Mastercard.
According to an affidavit submitted to the Supreme Court and seen by the Economic Times, the RBI state they have “…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 central bank suggests this enforcement meant “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.”
Although the specific “legal and operational risks” were not disclosed in the article, mention was made of the money laundering and terror financing which the central bank claims are associated with cryptocurrencies.
The hearing is scheduled to continue this week.