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RBI’s crypto ban was not backed by independent research or public consultation

The Reserve Bank of India’s order that prevented banks and other regulated entities from dealing with virtual currencies like Bitcoin was not backed by public consultation or independent research, an RTI response from the banking regulator has shown. In a response to the RTI application filed by a startup consultant, Varun Sethi, on April 9, the central bank said it does not have an internal committee that looks into virtual currencies, the Economic Times reported. The RBI responded by saying “No” to questions related to the formation of a committee within the regulator to understand the working of virtual currencies. NextBigWhat has a screenshot of the RTI response.

“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,” the petitioner Sethi who is a lawyer and founder of blockchainlawyer.in told ET.

SC to hear all petitions on virtual currencies

Last month, the Supreme Court had said that it will be hearing all matters relating to the RBI’s directive on virtual currencies. The apex court had directed the transfer of pending petitions which include, two in Delhi High Court and one in Calcutta High Court. The next date for the hearing is set for July 20. High courts will no longer entertain any more petitions relating to the matter. A total of five writ petitions including two in Supreme court have been filed challenging the central bank’s circular.

The Supreme Court had also asked the petitioners to make representations to the RBI regarding the circular within two weeks. The representations were supposed to be an opportunity for exchanges to showcase self-regulatory policies such as Know Your Customer (KYC) and Anti-money Laundering (AML) to central bank officials.

RBI’s cryptocurrency ban

Back in April, the RBI had directed all regulated entities including banks not to provide services to businesses dealing in virtual currencies (cryptocurrencies) like bitcoins. While the RBI had stopped short of banning cryptocurrencies entirely, this move severely restricts consumers’ ability to either purchase or sell cryptocurrencies like Bitcoins.

According to the Central bank, the decision came into effect immediately. Regulated entities which already are dealing with virtual currency shall exit the relationship within a specified time. RBI had said that it will issue detailed guidelines in a separate circular soon.

In a statement on various regulatory policies, the RBI had conceded that “technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system.” It goes on to say that cryptocurrencies “raise concerns of consumer protection, market integrity and money laundering, among others.”

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