Reserve Bank of India bans cryptocurrency with no empirical research

In its response to a right to information (RTI), the Reserve Bank of India has revealed that its decision to prohibit domestic financial institutions from dealing with cryptocurrencies such as bitcoins was not supported by any public consultation or independent research, The Economic Times reported.

Startup consultant Varun Sethi in April filed an RTI seeking responses from the central bank regarding its decision to ban the entities regulated by it from engaging with any individual or businesses involved with digital currencies.

In response to the question that whether the RBI established any committee to arrive at its statement about the risks associated with the trading of digital currencies, the central bank replied “No.” Furthermore, when asked if the RBI sought responses from other central banks on digital currencies, the RBI again replied “No.”

Quoting a December 2013 RBI press release on caution against virtual currencies, Sethi asked if the RBI conducted its own research before reaching the conclusion, the central bank once again replied “No.”

“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,” said Sethi, a lawyer and founder of blockchainlawyer.in.

In a bid to comply with the RBI’s ban, banks forced exchanges and traders to stop using their accounts for digital currency trading, who in turn have approached the Supreme Court of India. The hearing of the case is scheduled on July 20.