On April 6, the Reserve Bank of India (RBI) announced its rejection of cryptocurrencies issuing a ban on trading with virtual currencies (VC), today it has acknowledged that there was no study or foundation behind that decision.
The prohibition published on the official website of the RBI said things like:
“In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase/ sale of VCs…Regulated entities which already provide such services shall exit the relationship within three months from the date of this circular.”
On April 9, blockchain enthusiast Shri Varun Sethi who is part of blockchainlawyer, where they work to build disruptive and futuristic web 3.0 products using blockchain and cryptography, sent a request from RTI to The Central Bank of India (RBI), in which he made different consultations to find out how the cryptocurrencies had been concluded.
Questions such as:
Has RBI done its own research before reaching conclusion on its stance (which was mention in aforementioned notification) on virtual currencies. Is there any committee set up for understanding usage of virtual currencies for legal / illegal activities?
Has RIB got enquiries from counterpart Central Banks of other countries about virtual currencies? Share the details of such formal enquiries and how have they been disposed off?
Has RBI send out communication to other counterpart Central Banks outside India, in relation to virtual currencies to understand the regulatory framework, if any, they are building in their country to enable RBI to understand if similar regulatory frameworks can be built in India as well by RBI?
For all these questions, the response of the Reserve Bank of India has been a strong NO.
These answers show how arbitrary decisions based on total ignorance are reached, which can negatively affect the cryptocurrency sector without any real reason.
“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 analysing the concept of blockchain before the decision”