India has been a major hotbed for cryptocurrency discussions within the South Asian region. The country has repeatedly held a negative stance against digital assets despite several citizens using crypto on a day to day basis.
In a new twist to the Indian crypto saga, it has been revealed that the Reserve Bank of India [RBI] had not banned cryptocurrencies from the country. It had rather asked institutions like banks do not deal with Bitcoin and other altcoins.
The new information came to light on the back of a petition filed by the Internet and Mobile Association of India [IAMAI]. The IAMAI also includes some cryptocurrency exchanges, which is why they took this initiative. The central bank clarified that its 2018 circular was aimed to regulate cryptocurrency trades within the country and not ban them. The affidavit from the RBI read:
“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”
Some legal experts said that the stance taken by the RBI could be a weak one if it is not backed up by facts. One of the major concerns voiced by the RBI and the government of India was that virtual assets could be used to fund terrorism and drug trafficking. The IAMAI had blasted the RBI for curbing the development of an industry that was thriving in other regions and even contributing to the economy.
According to India’s principal bank, virtual assets will not be allowed to facilitate cross border transactions in the country. If any service is found to do so, stringent actions will be taken against them.
The 2018 discussions between the Reserve Bank of India and the government also included amending certain rules to exclude the functioning of crypto. The government suggested that the Foreign Exchange Management Act [FEMA] be changed to oversee digital asset developments.
The FEMA is an act established by the Parliament of India in 1999, the same time period when India first opened up for globalization. The main aim of the act is to make offenses related to foreign exchanges into civil offenses.
The Supreme Court of India had recently wrapped up the first three days of a landmark hearing related to the crypto ban. The proceedings went on from January 14-16 where the crypto side was defended by Ashim Sood, IAMAI’s legal counsel.
The court did not come to a final decision on the third day and has scheduled another hearing for the 28th. During the hearing last week, Sood argued that a ban cannot be imposed simply because of a lack of regulations related to cryptocurrencies.
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