Indian central bank calls for regulation of the crypto industry

Weeks after and four days after the resumption of hearing on the case between the cryptocurrency industry players and the central bank of India, the financial institution has conceded and called for the regulation of the industry in the country.

This is a blatant albeit welcomed u-turn from the stance they took in the beginning of April. The Reserve Bank of India released a prohibitive policy banning the banks and companies registered with them from dealing in cryptocurrencies and with accounts deal in cryptocurrency within a stipulated time frame of three months.

This disruptive policy ensured that the exchanges in the country can’t make crypto-INR pairs using which most of the community members cashed out their cryptocurrency assets and bought more of the same. The policy essentially ensured that the little support that the banks were lending was withdrawn.

The release of the policy circular triggered many court cases against the Reserve Bank of India, with one of them still being heard in the Supreme Court of India by the Chief Justice of India Dipak Misra and Justices AM Khanwilkar and DY Chandrachud. The case resumed hearing on the 20th of June and the bench has announced that the final hearing of the case will be on the 11th of September.

The Reserve Bank of India, after the release of the circular was the butt of a lot of legal actions and RTIs. In one of the RTIs filed against the central bank, the issuer inquired about the premise of the decision and whether any research into the matter was done. The reply to both the questions in the RTIs response were “No”.

But with the case in the Supreme Court, the Reserve Bank of India’s strong stance against cryptocurrencies in the country has softened periodically. With them first absolving themselves of any form of legal responsibility for releasing or enforcing the circular by saying that the issue should not be discussed in the courts but in the Parliament.

Later, the Reserve Bank of India admitted to having done absolutely no research or surveys before having released the circular on the 6th of April. They also went on to admit that they may have been too hasty by calling for and enforcing such a blanket ban on the industry.

Most recently, the RBI has agreed that there is a dire need for regulation in the local sector of the cryptocurrency industry and that they are now willing to work with other agencies to do and bring about the same. The Reserve Bank of India’s legal counsel himself said that the industry lacks regulation and that is the part that needs to be worked on and hence they released the circular. This was said in an argument that the lawyer presented to the bench on Friday last week.

The timing of this uncharacteristic u-turn that the Reserve Bank of India has taken is slightly curious because it coincides with the final drafting of regulations developed by the government’s cryptocurrency committee. If the rumours and the government grapevines are to be trusted, the government is looking at making and treating these cryptocurrency assets as commodities under the already existing tax brackets and laws.