Cryptocurrencies are still legal in India: RBI responds to a petition in the Supreme Court

The Reserve Bank of India (RBI) in response to a petition filed by the Internet and Mobile Association of India (IAMAI) said that cryptocurrencies have not been banned in India. However, the central bank said that its move was only to make sure that banks do not engage in the extremely trading of digital assets.

The petition by IAMAI seeks to overturn the directive RBI issued in 2018 barring all regulated financial institutions to stop involvement in all cryptocurrency transactions. The members of the IAMAI consists of various cryptocurrency exchanges. The Economic Times shared an excerpt from the affidavit filed by the RBI in the Supreme Court on September 4, 2019.

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.

Some of the risks highlighted by the RBI in the affidavit included anonymous cross-border money transfer, money laundering and terror financing. Despite its adamancy to allow banks to take part in the cryptocurrency market, the RBI has continued to support the “the development and adoption of distributed ledger technology also called blockchain technology.”