RBI, the central bank of India, has not made a proper effort to thoroughly research the nature and usage of cryptocurrencies before issuing its crypto ban. This is according to a reply sent by the bank to a Right to Information query filed by a lawyer. Copies of the communication have been distributed on social media and published by local crypto outlets.
The Right to Know Why
On April 5 of this year, India’s central bank issued a controversial decree directing all regulated financial institutions to quit providing services to businesses dealing in cryptocurrencies such as bitcoin, giving banks three months to comply. The move was formally motivated by the need to protect consumers and prevent money laundering. The Reserve Bank of India (RBI) also announced the formation of a working group to study the feasibility of issuing a state-backed cryptocurrency.
This week, however, it became evident that the RBI has not made any serious effort to thoroughly study and understand the nature, principles, and usage of cryptocurrencies before issuing the ban. No internal committee had been formed to investigate the purported risks associated with trading digital coins and no officer or team of experts had been tasked to produce a substantiated decision. Indian exchanges and individual traders were hit hard by the measure. The ban has been challenged in the Supreme Court, and some trading platforms have decided to leave the country in search of more favorable jurisdictions.
Earlier today, a Twitter user, @Blockchainlaw91, posted the Right to Information enquiry filed with the RBI, along with the reply sent back by the central bank. According to Kunal Barchha, cofounder and director of the company behind the upcoming crypto exchange Coinrecoil, the author of the query is Mr. Varun Sethi, an Indian blockchain lawyer. Coinrecoil’s operator, Kali Digital Eco-Systems, has appealed to the High Court in Delhi against the recent RBI crackdown.
Q&A with a Central Bank
Mr. Sethi has asked the RBI several relevant questions, including if there was any committee constituted within the RBI that had determined the risks being associated with trading in virtual currencies. He also wanted to know how these risks were determined, and if any responsibility has been entrusted to an officer or a team to understand the nature, working of cryptocurrencies and the possibility of their usage in India, the local outlet Crypto News reported.
To all of these questions the RBI has replied negatively and done away with referencing its multiple circulars mentioned as justifications for its actions. The bank has also noted that it “was a member of the Inter Disciplinary Committee constituted by the Finance Ministry and the Indian government in March, 2017, to examine the status of virtual currencies and suggest regulations,” as if that provides enough legitimacy to issue a ban…