The Supreme Court order revoking the cryptocurrency ban has been the cause of concern for the central bank of India. However, the latter has not taken any action protesting the order yet.
RBI Issues Advisory Warnings To Banks
In April 2018, the Reserve Bank of India (RBI) issued a circular which had imposed heavy restrictions on virtual currencies. However, in light of the Supreme Court’s order revoking all bans imposed on cryptocurrencies, the financial institution was compelled to rescind the circular. This means that the RBI has followed through with the Supreme Court’s order and rescinded its crypto ban. However, the central bank authorities are still holding on to their concerns when it comes to cryptocurrencies, as is obvious from their constant advisory warnings issued to its regulated entities to continue proper customer due-diligence processes. In addition, the RBI has reminded these entities to adhere strictly to the regulations for KYC, AML, CFT, and the Prevention of Money Laundering Act (PMLA), along with ensuring complete compliance with the Foreign Exchange Management Act (FEMA).
A source close to the central bank elaborated,
“Considering its prime responsibility of maintaining financial stability and the risks in cryptocurrency transactions like their possible use for illicit activities (money laundering, financing terrorism), price volatility, lack of customer protection, RBI has publicly highlighted its concerns.”
RBI And “Shadow Bans”
Although the RBI has not openly protested the SC order, there have been talks of “shadow banning” being imposed on several crypto projects. The most recent and prominent instance of this happening is the launch of the Coinbase app in India. Through the app, Indian users would be able to buy crypto tokens using UPI. However, soon after the launch, the National Payments Corporation of India (NPCI), the governing body overseeing UPI operations, refused to acknowledge UPI support on the Coinbase app. Therefore, the Coinbase team was forced to halt its India operations within just three days of launch.
CEO Brian Armstrong has pointed fingers at the RBI’s interference behind Coinbase’s loss of revenue, saying,
“[There are] elements in the government there, including at Reserve Bank of India, who don’t seem to be as positive on it. And so they — in the press, it’s been called a ‘shadow ban,’ basically, they’re applying soft pressure behind the scenes to try to disable some of these payments, which might be going through UPI.”