India’s apex bank, the Reserve Bank of India has filed a written document explaining why it restricted banks in the country from getting involved in transactions involving digital assets.
The 30-page affidavit was in response to a suit by the Internet and Mobile Association of India (IAMAI) which is representing a number of bodies contesting the central bank’s action at the country’s Supreme Court. This is an offshoot of a ban placed on Indian Banks since April 2018 barring banks from dealing with virtual assets such as Bitcoin.
According to the statement seen by Economic Times, the affidavit stated that the action of the regulator does not imply a ban:
“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.”
The statement alluded to the anonymous use of (some) cryptocurrencies which could make international remittances unaccounted for. Which is a scenario that the RBI hopes to counter if not completely eliminate.
The suit against the ban is still in progress with the next hearing coming up on Tuesday. Nevertheless, the impact of the restriction has been felt by crypto users in India which is home to some notable exchanges such as Zebpay and Koinex which have already closed their door to business with customers having no way of making investment transactions within the country.
The RBI revealed that its action was not unilateral as the bank took the decision to restrict banking services from crypto owners after making consultations with other relevant stakeholders in the government. It stated that it decided that initial coin offerings and digital currencies should be restricted from the country’s financial sphere having put into consideration some of the negative effects on the country’s economy.