It was reported in 2018 that the Indian Reserve Bank had banned cryptocurrency in the country. This position, communicated via a circular issued by the Bank, was queried in Court by the Internet and Mobile Association of India.
A bill proposing a formal ban on cryptocurrencies followed and there was industry resistance at the time. That bill never became law.
Recently, in an affidavit filed with the Supreme Court, the Reserve Bank of India has clarified the situation (according to the Economic Times) in saying:
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
This means that there is no ban on crypto-currency in India, but no digital currency business is able to open a bank account with any RBI regulated bank (i.e. all the banks in India). The RBI is plainly concerned about the history of digital currency use on the dark web, going on to say:
Any possible avenues which facilitate anonymous cross-border fund transfer have to be acted upon swiftly and stringently dealt with. It is an admitted fact that VCs have been used to purchase illegal and illicit goods ranging from guns and ammunition to drugs
Of course an immutable record of transactions is in fact something which can be use to act swiftly and stringently to police unlawful behaviour (such as in the Welcome to Video takedown), but that fact appears to have been overlooked by the RBI at this time. They are not alone with others continuing to state the obvious, that payments technologies can be used for both good and evil. Our view remains: the technology is neutral and should not be regulated, the activities that are engaged in are those things which should be properly the subject of regulation.
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