RTI: POLICY AROUND VIRTUAL CURRENCIES UNDER ‘FORMULATION STAGE’

An RTI response from Department of Economic Affairs around cryptocurrency says ‘Relevant policy [around Virtual currencies] is currently under formulation stage’, reaffirming the reports that cryptocurrency regulations may soon be a reality in India. 

Yusuf Rampurawala, a lawyer and crypto enthusiast from Mumbai filed an RTI application in May directed towards the Reserve Bank of India which was then forwarded to the Ministry of Finance (DEA).

Rampurawala’s intention behind the RTI was to get a response from Reserve Bank of India/Government about any Inter Disciplinary committee setup for regulation of cryptocurrency. He received details about the committee setup back in March 2017.

In its response, the DEA declined to share the report prepared by the committee in 2017 citing reason

The report of the committee contains policy issues of strategic importance and relevant policy is currently under formulation stage. Hence the query attracts Section 8(1)(a) of the RTI Act, 2005.

The acknowledgment of the ‘policy in formulation’ reaffirms that India may be seeing cryptocurrency regulations soon.

It was also revealed that the committee consulted National Institute of Public Finance and Policy (NIPFP), a research institute under Ministry of Finance and Vidhi Centre for Legal Policy, an independent think tank doing legal research. However, no official reports/letters were found of any correspondence with the two.

RTI response from Ministry of Finance

RBI DECISION IN HASTE?

The butterfly effect that spewed court cases, petitions, Peer to peer exchanges and a bunch of RTIs started with RBI’s announcement on April 5, 2018 during the First Bi-monthly monetary policy. RBI’s circulation banned the regulated entities like banks and NBFCs from dealing with cryptocurrency traders and exchanges. All existing relationship must be ended within three months. The three month deadline came to an end on July 06.

Another RTI application revealed earlier that RBI did not do any independent research or consultation before making the decision that choked the fiat-crypto trading almost to death in the country.

The inter disciplinary committee setup in 2017 had representation from banking bodies, RBI and SBI. The report that was prepared by the committee was never shared with the public. There is also another committee formed earlier this year headed by DEA secretary Subhash Chandra Garg, who announced the draft of regulations was ‘almost’ ready.

Despite these developments, RBI put a banking ban to discourage cryptocurrency trade and argued in the apex court that Virtual currencies ‘could encourage illegal transactions’.

If RBI was part of a committee that was setup to prepare a framework for virtual currencies in India, one must wonder, was the RBI decision made in haste or just to buy time until the government can properly regulate virtual currencies?

“RBI was mandated by the Government in 2017 to study virtual currencies, along with other ministries and entities. [crypto trade] has been happening for the past 5 years and nothing was done until 2018 then suddenly only RBI comes with a decision to ring fence the banks in April, while other entities have not said anything. RBI’s decision was also taken without any independent research. What is the rush?”, Yusuf Rampurawala told Coin Crunch.

RBI has cited “investor protection” as one of the reasons for their decision in a response to representation filed by the IAMAI earlier this month. On July 20, senior advocate Shyam Diwan, on behalf of the central bank argued cryptocurrencies can encourage illegal transactions in the Supreme Court.

While the fight continues, cryptocurrency is not banned in India and hence exchanges have found ways to allow their users to keep trading with INR fiat using Peer to peer exchanges and also opened channels for crypto to crypto trading.