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Wednesday, June 23, 2021

RBI’s relationship with cryptocurrency and its consequences

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On April 6, 2018 the Supreme Court considered the RBI’s banning of crypto currency as unconstitutional. The circular that contains the ban regulations that was issued by RBI states that all bodies regulated under it need to abstain from dealing in virtual currencies. After the circular was issued the ban was imposed and followed the guidelines laid down by RBI. The ban, however, was held ‘disproportionate and unreasonable’.
RBI had told Supreme Court in January in an affidavit that the circular has not banned cryptocurrencies but only diluted or fenced regulated entities from associated risks. “This is a huge win for crypto investors and startups who are working on new ways to build business backed on blockchain and tokens. Indian Startups which moved out of the country should now come back and set up shop in India. VCs should start looking at investment in crypto startups. Crypto winter in India is over,” said Sanjay Mehta, Founder and Partner, 100X.VC. The hearing was done by three judge bench comprised of Justice RF Nariman, Justice Anuraddha Bose and Justice V Ramasubramanian.

The factor that triggered the central bank to take this step remains anonymous until now as no explanation as such has been made from any end. But the guidelines that were laid down in 2013 shed some light on the bank’s issues with cryptocurrencies. The issues are in regards with the lack of security and regulation of legal practices of virtual asset/currency. The scare roots from the illegal exchanges of bitcoin that have been held on record by the center. Where some of these concerns make sense, others don’t. The primary concern behind the entire ban is the understanding of how there is a lack of sensibility from the bank’s end in regards with the concept of bitcoin. From the pros and cons of cryptocurrency, it seems only cons were considered.

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