The Indian Central Bank has confirmed that there is no ban on cryptocurrencies in India. The central bank explained that all it does is separating the entities (like banks) it regulates from the risks associated with trading cryptocurrencies.
RBI has not banned cryptocurrencies
During a last week's hearing in the Supreme Court of India, the adviser of the Internet and Mobile Association of India (IAMAI), Ashim Sood, read the answers given by the Indian Central Bank, that is by the Reserve Bank of India (RBI). In August last year, the Supreme Court ordered the central bank to answer every point of the statement made by cryptographic exchanges in the case of banking restrictions imposed by the bank on the cryptographic industry.
The RBI clearly states in its response to IAMAI that it has not put a ban on virtual currencies in the country. In April 2018, while issuing a circular, the central bank instructed entities it regulates to stop providing services to persons or entities trading or settling cryptocurrencies.
As The Economic Times reports, cryptocurrencies are not banned by either the central bank or by the Indian government.
"The Reserve Bank of India has said it had not banned cryptocurrencies such as bitcoin in India, but only ringfenced regulated entities like banks from risks associated with trading of such virtual instruments."
RBI: cryptocurrencies are used for illegal activities
The central bank justified its banking restrictions by claiming that cryptographic activities pose not only a reputational and financial risk but also risks legal and operational.
"It is an admitted fact that VCs [virtual currencies] have been used to purchase illegal and illicit goods ranging from guns and ammunition to drugs."
- wrote RBI in its statement.
According to The Economic Times, RBI has previously advocated banning ICO, and argued that funds investing in cryptocurrencies should not be allowed to operate in India. What is more, the central bank proposed to amend the Foreign Exchange Management Act in order to both prevent and track money transfers in the case of investments in virtual currencies.
Supreme Court hearing on ending banking restrictions
After the RBI's circular (April 2018), banks closed their cryptographic exchange accounts as a consequence of which some of the exchanges were forced to quit. A number of cryptographic stakeholders immediately petitioned for bank restrictions which resulted in the restrictions being now considered by the Supreme Court. Last week, the Supreme Court resumed its consideration of the case. During the three days of hearings, extensive arguments were presented in an attempt to convince the court to provide assistance. The victims claim that by closing the bank accounts of cryptographic exchanges, the central bank has, in fact, banned cryptographic activities.
The Indian government, on the other hand, is still considering a bill which is supposed to ban cryptocurrencies (with an exception of those issued by the state). The project of the bill was not introduced to the parliament, even though the government announced that it would be introduced by the end of last year. A delay like that gave the Indian cryptographic community hope that the government could decide to regulate the cryptographic industry instead of joining the abovementioned bill.