The Reserve Banks of India (RBI), India’s central bank, has been warning the citizens of India against the dangers of investing in crypto since 2013. The central bank followed through with two more major warnings in 2017 before it finally came down hard on the cryptocurrency industry earlier this year.
An April 5 this year, the RBI issued a somewhat controversial decree that required all regulated financial institutions to quit providing services to business dealing in cryptocurrencies – this was accompanied by a three-month compliance deadline. According to the bank, the move was primarily motivated by the need to protect consumers and prevent money laundering. At the same time, the RBI also announced that it would be forming a workgroup that would be tasked with the study of the feasibility of issuing a state-backed cryptocurrency.
As expected, not everyone agreed with the RBI and its decision especially because of the concern that the bank did not conduct proper research prior to issuing the decree. This concern was confirmed this week when the RBI revealed that had made no serious efforts to effectively and explicitly study and understand various aspects of cryptocurrencies before issuing the ban. Furthermore, the bank did not form an internal committee to investigate the purported risks that it associated with cryptocurrencies.
“The RBI specifically mentions that it conducted no research or consultation before the implementation of restriction in April. The RBI also responded that no committee was ever formed for analyzing the concept of blockchain before the decision,” said Sethi, a lawyer and founder of blockchainlawyer.in.
The most affected parties, in this case, were the Indian cryptocurrency exchanges and individual traders, most of whom believe that even though they are opposed to it, they actually did expect something like that to come up. It is becoming more common for governments to make spontaneous decisions on crypto without studying it first. For instance, Japan and Russia have tried to ban crypto but have been forced to soften their stances on the issue owing to the backlash, and India is certainly headed in the same direction.
What Next?
Multiple lawsuits were filed against the RBI and some of them are already taking root into how the future of crypto in the country will play out.
“This RBI response has cemented our case ahead of the hearing in SC. The grounds on which our writ petition has been filed is that the RBI has not done enough research to ban a business completely,” Rashmi Deshpande, one of the lawyers fighting out the case in India’s Supreme Court told local news outlet.
According to June 13 report by the Economic Times, the RBI has already softened its position and therefore going to lift sanctions and the ban on crypto thus allowing trading once again. Some other reports have conflicting information but one thing that is clear is that there is a lot of effort being made toward making sure the decision is reversed.
“The foremost reason we are fighting is because we know that banning is next to impossible and it will make things worse for everyone – for the Reserve Bank, for the government, for the tax department, and for the user. In addition, it will push India back in reference to blockchain adoption across the world. We always have an option to relocate to other countries to carry our business, but that’s not the solution. If we cannot convince our own government, we cannot expect other governments to support us,” says Kunal Barchha, one of the founders of Coinrecoil.
