According to Anthony Pompliano, a partner at Morgan Creek Digital better known to the cryptocurrency community as Pomp, banks in India are being pressured by the Reserve Bank of India (RBI) to close the accounts customers that deal with Bitcoin and other crypto assets.
Banks in India are now saying they will now close customers' accounts if they deal in cryptocurrencies.
These legacy institutions fear what they can't control, but people should be allowed to do whatever they want with their wealth.
Long Bitcoin, Short the Bankers! pic.twitter.com/vvjniodaiL
— Pomp 🌪 (@APompliano) January 11, 2019
The country’s central bank has consistently maintained its hostile stance towards cryptocurrencies for many years and it has recently started to strengthen its prohibition on cryptocurrency trading.
How Strong Can a Bitcoin Ban be?
The RBI has been approaching cryptocurrency regulation in a similar way to China, by simply banning out all things related to crypto.
Last year, as per the request of the RBI to not deal with cryptocurrency-related businesses, local commercial banks terminated their relationships with digital asset exchanges.
Unable to receive banking services and struggling to compete in the crypto-to-crypto trading market that is dominated by exchanges in the likes of Binance, OKEx, and Huobi, many exchanges shut down their platforms and moved onto Bitcoin ATM distribution.
The RBI then banned Bitcoin ATMs in India, going as far as to arrest the operators of the country’s first Bitcoin ATMs.
The overly strong stance of the RBI in regard to Bitcoin and crypto assets in general during a period in which the G20 and major economies in the world are gearing toward cryptocurrency regulation for a sound reason to prevent money laundering through digital assets suggests that the institution is concerned about a potential catalyst that may revitalize the local market.
Currently, a review of the RBI’s ban on Bitcoin and cryptocurrency trading is ongoing by the Supreme Court of India.
Speaking to the New India Express last month, a senior official of the government revealed that a second interdisciplinary committee established by local authorities met twice and the consensus has been to regulate and legalize cryptocurrencies under strict policies.
The official said:
“We have already had two meetings. There is a general consensus that cryptocurrency cannot be dismissed as completely illegal. It needs to be legalized with strong riders. Deliberations are on. We will have more clarity soon. We have also taken inputs from cryptocurrency exchanges and experts and will be examining legal issues with the law ministry. It’s a complicated issue. Once all aspects are decided, then we will have more clarity.”
The Supreme Court of India has the authority to overturn the RBI’s controversial decision to ban cryptocurreny businesses. Recognizing such authority, the RBI told the Supreme court of India to not interfere with its decision.
A circular released by the RBI in April of last year said that the court does not have a right to enable banks to work with cryptocurrency businesses and that the RBI has the authority to ban the usage of digital assets.
“The impugned circular and the impugned statement neither violate the right to equality guaranteed under Article 14 or the right to trade and business guaranteed under Article 19 of the Constitution…The petitioner cannot seek to exercise the extraordinary jurisdiction of this Hon’ble Court to avail a right which they do not have,” the circular read.
The RBI may fear that the Supreme Court of India may overturn its ruling or the government through the interdisciplinary committee may legalize cryptocurrencies.
But, the central bank’s plans until such events take place seem to be to completely prohibit any cryptocurrency-related activity in an attempt to decrease the demand for digital assets in the country.
If the government does legalize cryptocurrencies under strict regulations, the initiatives led by the RBI may significantly hinder the long-term growth trend of the local cryptocurrency exchange market and the country’s blockchain sector.