Cryptocurrencies fight to survive in India even as RBI claims there’s no ‘ban’

• The Reserve Bank of India (RBI) admitted that virtual currencies do not fall under its regulatory purview and thus it does not have the power to ban cryptocurrency trade.
  
• However, it has banned banks from engaging in virtual currencies.
  
• The RBI and the Internet and Mobile Association of India (IMAI) have been battling for cryptocurrency’s survival in India since last week.
  
• Ashim Sood, IMAI counsel, argues that only the Parliament has the power to ban cryptocurrency.
  
• He also cited multiple examples from other countries around the that still engage in crypto trade, despite the threat of cybersecurity by employing regulatory tools — rather than implement a blanket ban.
  

The Reserve Bank of India told the Supreme Court that cryptocurrencies aren’t illegal in India — it’s just that banks are barred from trading in them. However, advocates argue that without a banking system to support cryptocurrencies, trading just isn’t possible.

India’s apex bank admitted that virtual currencies did not fall under its regulatory purview. It also admitted that it’s not aware of all the different kinds of cryptocurrencies available in the market. Despite incomplete information, RBI claimed that it banned banks from engaging in virtual currencies because of the associated risks — like cybersecurity and money laundering.

Ashim Sood argued on behalf on the Internet and Mobile Association of India (IMAI), stated, “[The] power to regulate monetary policy does not empower RBI to stop or exclude crypto,” as per a Crypto Kanoon report.

According to him, if anyone has the authority to implement any kind of ban on economic activity, it’s the legislative arm of the government — not the RBI, which is the executive branch.

This means that in order to ban cryptocurrencies, the parliament will need to pass a Bill through Lok Sabha. Only then will the RBI be empowered to execute the ban.

Crypto isn’t a ‘currency’ it’s an instrument
Sood argued that the only reason the RBI felt the need to intervene was because crypto was being treated as a ‘currency’ — just as every malware gets called a virus.

However, it should be treated as any other financial commodity akin to gold or silver — they aren’t currency but still store value. The threat perception is why RBI thought crypto should possibly be another parallel currency on the rise that could threaten the sovereignty of the nation.

But if it’s not a currency, it’s not a threat, according to Sood.

Here’s what India can learn from the rest of the world
The RBI’s main concern is that cryptocurrency exchanges are more vulnerable to getting hacked, which means that a layman could lose all of his savings overnight without any back-up plan in place.

Sood argued that even though MountGox, a cryptocurrency exchange in Japan, was subject to one of the biggest hacks in recent history — Japan’s government still chose not to ban cryptocurrency. They decided to regulate the industry instead.

Just as netbanking and online transactions have their own set of rules when it comes to cybersecurity, guidelines can be put in place for cryptocurrencies as well. Since Japan’s new regulations have been enforced, no subsequent hack on cryptocurrency exchanges has taken place.

Sood also cited multiple examples from the Financial Action Task Force (FATF) guidelines. Some of the strongest nations in the world are signatories who agree that cryptocurrency should not be banned. Instead, FATF guidelines are used to combat issues like money laundering and terror financing.

According to Sood, cross-border transactions in cryptocurrency should be subject to the same rules as SWIFT transactions and have the same safeguards in place, they require customers to KYC before getting an account.

The case hearing was supposed to continue for the fourth day in court today. However, Justice Bose, of the three-judge bench precising over the case, is on leave. It’s likely the hearing will be adjourned to tomorrow, as per a report by Crypto Kanoon.