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IAMAI says RBI has no authority to ban cryptocurrencies
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SME Times News Bureau | 14 Aug, 2019
Challenging a Reserve Bank of
India (RBI) circular prohibiting banks and financial institutions from
providing services in relation to cryptocurrencies, the Internet and
Mobile Association of India (IAMAI) on Wednesday told the Supreme Court
that the RBI did not have the authority to place a ban when there was no
legislative policy in place for virtual currencies.
"RBI cannot
step out of its powers as set out in Banking regulation Act. Therefore,
its action against private businesses in the form of a circular is
illegal," IAMAI counsel Ashim Sood said.
The counsel also emphasized that the central bank did not undertake research before issuing the ban.
Advocate
Sood also informed the court about definitions of 'virtual currency'
and cited various sources to show that there are many meanings of
virtual currency and various types of it. He said that the circular is
vague because it does not define virtual currencies.
The counsel
cited various judgements in support of his petition and cited the acts
of regulations taken up by the G20 nations like US.
Cryptocurrencies
are digital currency in which encryption techniques are used to
regulate the generation of units of currency and verify the transfer of
funds.
According to the April 6 circular of last year, the
entities regulated by the RBI are prohibited from "providing any service
in relation to virtual currencies, including those of transfer or
receipt of money in accounts relating to the purchase or sale of virtual
currencies".
The Internet and Mobile Association of India said
that the RBI had banned cryptocurrencies on "moral grounds" as no prior
studies were conducted to analyse the effect of these virtual currencies
on the economy.
The association contended that the RBI circular
has barred all the entities regulated by the apex bank from providing
services to any individual or business dealing in virtual currencies
like cryptocurrencies.
IAMAI said that the blockchain technology
adopted in these virtual currencies was not disputed and, therefore, a
blanket ban was "arbitrary, unfair and unconstitutional".
As the argument remained inconclusive, the court has listed the matter for next Tuesday for further hearing.
The
Internet and Mobile Association of India is a not-for-profit industry
body whose mandate is to expand and enhance the online and mobile value
added services sectors.
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