The Reserve Bank of India (RBI) is pushing back against the belief that it banned cryptocurrencies from the country, after it was accused of doing so by a major tech regulator.
As the Economic Times reported earlier today, the RBI issued a response to the Internet and Mobile Association of India (IAMAI), a non-profit entity that exists to lobby for the interests of its members. Last year, the agency- which consists of companies such as Yahoo!, Apple, eBay, and more- wrote to the RBI in an attempt to convince what it deemed a ban on cryptocurrencies in India.
Banking Restrictions Weren’t an Outright Crypto Ban
Of course, the IAMAI was referencing a circular released by the country’s highest banking institution, in which it directed commercial banks nationwide to cease from offering their services to businesses that operate in the crypto space.
The IAMAI took offense against this decision, and appealed the “ban” at the Supreme Court. Last month, the agency argued that cryptocurrency trading was a legitimate business. Still, the activity wouldn’t be able to thrive in India because the RBI has blocked crypto exchanges and trading platforms from getting access to bank accounts.
In its response, the RBI reportedly pointed out that it didn’t ban virtual currencies- it only made these banks aware of the many risks associated with the sector, thus helping to shield them from any of these risks- as it is supposed to.
In an affidavit, the agency reportedly expatiated,
“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.”
IAMAI Calls for Effective Crypto Regulations
Both parties are currently locked in a legal battle at the Supreme Court, with court hearings and appearances starting last week. The legislation passed by the RBI has had devastating effects on the Indian crypto space, especially considering that no business will be able to operate without owning at least a bank account.
Several crypto-related companies in the country have either been forced to overhaul their operations or completely shut down, with all of them echoing the same sentiment on how the government is killing the sector.
In last week’s hearings, Ashim Sood, the legal counsel for the IAMAI, argued on several grounds, including that while there hasn’t been any international jurisdictional conclusion that crypto can’t be regulated, the RBI seems to have made that conclusion ion its own. He added that the government has still been unable to tackle several macroeconomic issues such as capital outflows, and by restricting cryptocurrencies, its ability to handle these issues is even further hamstrung.
On the topic of cryptocurrencies and their risks, Sood pointed out that several countries and regions have been able to adopt regulations- including licensing requirements, capital requirements, and other measures- to regulate crypto companies and bring them under the umbrella of existing laws. Instead of just kneecapping the crypto space and all the companies that operate therein, he argued that effective and progressive regulations should be put in place.