RBI’s reply to RTI petition

For last couple of days, an insignificant reply to an RTI (Right To Information) application from RBI (Reserve Bank of India) is being highlighted in crypto related media and community channels. A Delhi based startup consultant and founder of blockchainlawyer.in, Advocate Varun Sethi had filed an RTI application last month to which RBI, the central bank of India, has replied to some of the questions put in that petition.

RBI’s reply made news everywhere

Some of the prominent reporting in the media about this can be found at:
Economic Times
Business Today
Coin Desk
Bloomberg Quint
Money Control
The Next Web
NEWS18
QUARTZ India
Coin Crunch India

All these news in prominent media has delighted the crypto community of India. This news is being hyped excessively to boost the community optimism in India. However, in my opinion, this doesn’t have much significance in reversal of the RBI’s order of withdrawing banking services to crypto related businesses.

Is RBI in trouble?

The news hangs heavily on RBI’s response that it has not constituted any committee to evaluate risks associated with trading cryptocurrencies before putting a ban on banking services for crypto exchanges. The question is being raised, how RBI can declare a ban on cryptocurrencies without conducting any research to understand its functioning. But we need to understand that, this doesn’t dilute its power to issue such notifications.

Constituting a Committee is not mandated to arrive at any decision. It depends on the methodology of workings of the Government or the particular institution. Did Indian Government conduct any research before declaring demonetization of higher denomination bills in November, 2016? Did RBI constitute any committee to decide on introducing 200/- denomination bill or to discontinue printing of 5/- or 20/- rupee paper bills? Whether it’s a loan waiver to farmers or announcing subsidies or taxes on petrol, gas etc.; most of the decisions of Government are arbitrary and intuition based without any substantial surveys and research. So legally, RBI is not in trouble with its response to the RTI.

RBI is part of Committees studying Digital Currencies

The other thing which is being blatantly ignored in the news is the fact that RBI has been a member of at least two committees related to cryptocurrencies:

(1) Inter-Disciplinary Committee constituted by Ministry of Finance, Government of India in March, 2017 to examine the present statue of Virtual/Digital Currencies in India, regulatory approach adopted globally and to suggest a framework for regulation in India.

(2) Committee chaired by Secretary, Department of Economic Affairs, Ministry of Finance, GoI; constituted in November, 2017 to study the issues related to Virtual Currencies.

These facts were also explicitly mentioned in the reply to the said RTI. So it’s obvious that projecting RBI as lame and stupid in the field of cryptos is derogatory and defamatory of the Central Bank of India.

The hearing against the RBI restriction of cryptocurrencies is already scheduled in Supreme Courts of India on July, 20. This fact may be brought to court’s attention to strengthen the argument. But this reply in itself won’t make much favourable impact, imho. There are many better and stronger arguments to put along with this. So don’t get over enthusiastic and start slandering the functioning of your country’s own central bank because of this insignificant news.

Financial news agency Cogencis has signalled a U-turn!!!

If you want to hear something really positive, pray that the following news tweeted by Cogencis is true:

It looks to be some insider news that a high level government panel is in favour of regulating cryptocurrencies with some riders instead of a blanket ban.

However, Indian government has never intended to put a complete ban on crypto currencies to date. It only wanted to discourage the general public considering it as a risky investment. So it can't be termed a U-turn exactly.

Cogencis has not disclosed any further detail so far. But the reliability of its sources can be judged by the coverage it has received in the media like Economic Times, Coin Crunch, CCN etc.

In fact, the source of the above news was the first to report on 7 February, 2018, that the Government is considering a new law on banning cryptocurrency exchanges in India. Two months later, we all know that it came true.

So in all likelihood, we can safely assume that this news too is based on reliable sources. Yes, we should expect some regulations like mandatory KYC, declaration of income and some taxation. But let’s wait what the committee decides. Government will try its best to regulate it but how much strictly it can implement, it remains to be seen. Let’s stop panicking over it now. There can't be a better time for such an uplifting news when the Bitcoin is at its lowest price level of this year. .