Contrary to the general opinion that cryptocurrencies like Bitcoin are banned in India, the Reserve Bank of India has conveyed to the Supreme Court that digital currencies are not banned. RBI says it has only ring-fenced banks and other regulated entities from dealing in the currencies that could result in losses for them.
This statement by RBI is part of a 30-page response in the form of an affidavit that the banking regulator had submitted to the apex court in a case filed by the Internet and Mobile Association of India (IAMAI). The appeal by IAMAI to the Supreme Court was in objection to RBI’s circular in 2018 where it had stopped the banks from dealing in cryptocurrencies which amounted to banning legitimate business transactions.
Reserve Bank of India has explained in its affidavit to the Supreme Court that it was not against any technological innovations. However, cryptocurrencies have earned the reputation of being used for illegal transactions and for funding terrorist activities. Money laundering is another activity associated with the virtual currencies. The regulator therefore wanted that the financial institutions in India which are regulated by it do not fall a prey to the risks associated with dealing in cryptocurrencies.
The central bank had offered similar advice to the Indian government as well not to allow initial coin offerings (ICOs) and asset funds based on virtual currencies in the country. This too has been disclosed by RBI in that affidavit.
The cryptocurrency debate is raging in many countries across the world. Those in favour of cryptocurrencies claim it is the currency of the future and governments should adopt them in the economy. Those opposing point out how volatile the currency, particularly Bitcoin has been and how gullible public have lost billions of dollars of their hard-earned money chasing fortunes in Bitcoin. There have also been cases of massive hacks through which the cryptocurrency assets held in exchanges have been wiped out overnight, leaving the owners of these currencies with nothing to show.
The next hearing on the case in the SC is fixed for January 21, 2020.