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 Economic Times of India cited a document the RBI submitted to the country’s supreme court in September, which said: “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”
“Firstly, the RBI has not prohibited VCs (virtual currencies) in the country”
The central bank added: “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.”
The biggest concern amongst bank has been fears regarding money laundering, terrorism financing and the exchange risk faced by financial institutions, as a result of the volatile nature of crypto markets.
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.
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.
Meanwhile, 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.