The Reserve Bank of India (RBI), as part of its bi-monthly monetary policy statement, imposed restrictions on regulated entities like banks from providing services to any individuals or businesses that buy, sell, or trade in cryptocurrencies such as Bitcoin and Ethereum.
This was the first move that the RBI made in an effort to dissuade investors and traders from dabbling in cryptocurrencies. The statement gave banks a window of three to six months to end relationships that facilitated the trading of cryptocurrencies and came as a major setback to the Indian crypto community which is estimated to have over 5 million investors. While the RBI did impose restrictions on transactions related to cryptocurrencies, it did not ban cryptocurrencies themselves. The statement was misinterpreted by many and misinterpreted to be a ban on cryptocurrencies, sparking fear, uncertainty, and doubt (FUD) in the minds of investors across the nation.
More recently, rumors that the Indian government is planning to introduce a bill titled ‘Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill, 2019’ have been doing the rounds. The rumors also said that the government plans on imposing strict laws against the buying, selling, holding, or trading cryptocurrency. Reports said that anyone engaging in such activities could face a non-bailable warrant with a jail term of up to ten years. Reports also claimed that a number of governmental agencies have backed the draft bill. It is interesting to note that the RBI has denied knowledge of or involvement in the drafting of any such legislation, in response to an RTI inquiry by blockchain lawyer Varun Sethi.
These rumors gained traction due to the wide media coverage but were dismissed by investors in the country as FUD, which is evident from the sustained growth in volume across exchanges in the country.
Further, the fact that the Financial Stability Board (FSB), an international body tasked with monitoring the global financial system, clarified that the RBI cannot directly regulate crypto-assets, and can only merely limit the exposure of regulated entities to such assets solidifies that the rumors are only FUD and should be treated as such.
According to another Right to Information request filed by Sethi, the RBI acknowledged that it had not done any research prior to issuing the circular that would restrict banks from allowing crypto-related transactions.
The RBI’s restrictions on financial institutions engaging in transactions the trading of crypto are the only concrete decision that has affected the trading of cryptocurrency in the country. Several exchanges in the country have shut down, blaming the banking restrictions for their closure. All other news of banning of cryptocurrency should be taken lightly as there has been no official confirmation about the same. Currently, the Indian crypto community is eagerly waiting for the apex court of the country to resume hearing the ongoing case about cryptocurrencies and their regulation on July 23, 2019.
