India’s central bank, the Reserve Bank of India (RBI), has clarified that it has not prohibited cryptocurrencies in the country. Rather, authorities are focused on enacting regulations to prevent illegal financial activities.
The RBI clarified that it only fenced in the entities it regulates, such as banks, from risks associated with trading cryptocurrencies. The news will bring relief to many investors, who have had to endure several months of uncertainty regarding their investments. The RBI had previously ordered banks in the country to deny services to cryptocurrency-related entities, which began a protracted debate.
Cryptocurrencies Not Made Extinct in India
The RBI clearly states in its reply to the IAMAI that it has not prohibited virtual currencies in the country, the publication reiterated. In the circular issued in April 2018, the central bank only directed the entities it regulates to stop providing services to persons or entities dealing in or settling cryptocurrencies.
However, the Indian government told Rajya Sabha in July last year that “Cryptocurrency can be used for secret and illegal activities, but there is no data to corroborate that it is primarily being used for such activities.”
The specific risks that the RBI referred to were money laundering and terror financing. The latest statement comes in response to a petition filed by the Internet and Mobile Association of India (IAMAI), which also includes cryptocurrency entities.
Banks Can Do Crypto-Related Transactions
Pro-cryptocurrency entities have been defending the market, arguing that cryptocurrencies ought to be regulated sensibly, and pushing for more general adoption of blockchain technology. On their part, the Indian government has been showing a lot of interest and execution in this regard, with India already testing the technology in the use cases of financial services, land registry, and solar energy distribution, among other things.
Following the RBI’s April 2018 circular, banks closed the accounts of crypto exchanges, forcing some of them out of business. A number of crypto stakeholders immediately filed writ petitions over the banking restrictions which are being heard by the supreme court. The IAMAI represents a number of its crypto exchange members in court seeking to lift these restrictions.
India Setting Up Proper Regulations for Virtual Currencies
In addition to suggesting that initial coin offerings (ICOs) should be prohibited, the RBI said funds investing in cryptocurrencies should not be allowed to set up in India.
With the RBI’s confirmation, cryptocurrency is neither banned by the central bank nor the Indian government. In July last year, the government confirmed to Rajya Sabha, the upper house of India’s parliament, that cryptocurrency is not prohibited in the country.
Investors and cryptocurrency proponents have used the success of regulation in countries like Malta and Japan, as well as explaining the technology itself, to allay any fears of illegal activity, and encourage innovation-friendly regulation.
the Indian government is still deliberating on the draft bill which seeks to ban cryptocurrencies, except state-issued ones. The bill has not been introduced in parliament even though the government said it would be introduced by the end of last year. The delay has given the Indian crypto community hope that the government may decide to regulate the crypto industry instead of proceeding with the aforementioned draft bill.