The Internet and Mobile Association of India (IAMAI) on Thursday told the Supreme Court (SC) that the Reserve Bank of India (RBI) had banned cryptocurrency on ‘moral grounds’ as there were no studies the banking regulator conducted to analyse if these virtual currencies were actually harmful or not.
In its challenge to the RBI’s circular barring banks from dealing in virtual currency, the IAMAI said while the underlying technology called blockchain was not in question, a total prohibition on cryptocurrency was uncalled for.
It its arguments, the IAMAI said there was a reply given by the RBI under Right to Information, where it had accepted that no study had been undertaken by the RBI and neither had any committee been formed to analyse the risks and benefits of cryptocurrency, before banning it.
The apex court, after hearing the submissions made by the IAMAI, asked it to prepare a chart and cite instances or judgments from other countries which have regulated cryptocurrency, instead of banning it.
The RBI has maintained that owing to ‘significant spurt in the valuation of many virtual currencies and rapid growth in initial coin offerings’, virtual currencies were not safe for use. It had, in 2013, cautioned ‘users, holders, and traders of virtual currencies, including bitcoins, about the potential financial, operational, legal, customer protection, and security-related risks that they were exposing themselves to’.
The RBI had on April 6, 2018, said it had repeatedly ‘cautioned users, holders, and traders of virtual currencies, including bitcoins, regarding various risks associated in dealing with such virtual currencies’. As a follow-up to those warnings, it had barred all entities which are regulated by the RBI from either dealing in virtual currencies or providing services to those dealing in such currencies.
“Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer/receipt of money in accounts relating to purchase or sale of virtual currencies,” the RBI had then said.
Earlier this year, the banking regulator had also told the SC that bitcoins and virtual currencies were ‘harmful’, and that it had asked banks not to provide any banking services to digital currency systems as it did not want it spreading like ‘contagion’.
Though the top bank had disassociated itself and the entities it regulates with bitcoin, it had decided to promote the use of blockchain technology.
Blockchain technology is the backbone on which bitcoin and other virtual currencies operate. Former finance minister Arun Jaitley had earlier said the government doesn’t consider cryptocurrency as legal tender and will take all measures to eliminate payments using them.