Banks Await Directions From RBI On Cryptocurrency Transactions

After the Supreme Court lifted the ban on cryptocurrency transactions, the stakeholders are seeking clear directives from the Reserve Bank of India to banks to allow transactions in cryptocurrencies.

An ET report said that Fintech Lawyers, a law firm representing cryptocurrency traders, has written to the government and RBI for the directions. In a letter to the finance secretary and the RBI, Mohammed Danish of Fintech Lawyers said, “Ïn most of the cases the banks have not given any written communication but verbally informed their customers that they are waiting for RBI notification in this regard.”

Bankers have stated that channels for cryptocurrency trade would only be opened on explicit regulatory orders from either the central bank or the parliament, as the legality of such trades is yet not clearly defined in India, despite the SC ruling. It further said that the capabilities of domestic banks would be tested in allowing such trades without a sound supervisory mechanism to govern cryptocurrencies.

The resistance comes despite Supreme Court order from March 4 which lifted the banking ban on cryptocurrency trading in the country. The RBI has virtually banned cryptocurrency trading in India in April 2018. It had also issued circulars cautioning users, holders and traders of virtual currencies, including Bitcoin.

However, RBI is said to be planning to file a review petition in SC to curb cryptocurrency transactions in India. RBI is concerned about the flaws which would come along with cryptocurrency transactions. The central bank believes that allowing cryptocurrency transactions will put the banking system at risk.

In its order, the SC said that citizens have the right to create a new cryptocurrency industry and exchanges along with the fundamental right to trade. Moreover, the SC had said that the right to create something new, which doesn’t violate any existing provisions, is an unsaid fundamental law.

Moreover, the apex court also said that RBI had failed to show how cryptocurrencies will put the banking system at risk. The court also found that the banking system was a lifeline for virtual currency exchanges. However, since then there has been no announcements from the government or the RBI indicating that the quasi-ban has been lifted.