While the Reserve Bank of India (RBI) has highlighted concerns over cryptocurrencies from time to time, it has not issued any instruction going against the Supreme Court’s order.

Coinbase CEO and co-founder Brian Armstrong had recently said informal pressure from the RBI led the global crypto exchange to disable UPI deposits, a few days after its India launch. However, a person in the know pointed out that the RBI has only publicly highlighted its concerns on cryptocurrencies.

Highlighting concerns

“Considering its prime responsibility of maintaining financial stability and the risks in cryptocurrency transactions like their possible use for illicit activities (money laundering, financing terrorism), price volatility, lack of customer protection, RBI has publicly highlighted its concerns,” the source said.

The RBI in its May 31, 2021, circular had stated that in view of the Supreme Court order, its circular of April 6, 2018, which had imposed certain restrictions on regulated entities in dealing with virtual currencies, is no longer valid from the date of the judgment. The RBI had also advised its regulated entities to continue to carry out customer due diligence processes in line with regulations governing KYC, AML, CFT and obligations under Prevention of Money Laundering Act (PMLA), 2002, in addition to ensuring compliance with relevant provisions under Foreign Exchange Management Act (FEMA).

‘Unique market’

Armstrong, in the company’s earnings call, had noted that India is a unique market in the sense that the Supreme Court has ruled that they can’t ban crypto. “But there are elements in the government there, including the Reserve Bank of India who don’t seem to be as positive about it. And so they, in the press, it’s been called a “shadow ban” — basically, they’re applying soft pressure behind the scenes to try to disable some of these payments which might be going through UPI,” he had said.

Coinbase had launched crypto trading services in India on April 7 and had announced that Indian users would be able to transact on its platform using Unified Payments Interface (UPI). However, the National Payments Corporation of India, which owns and operates UPI had issued a statement the same day that it was “not aware of any crypto exchange using UPI”. Following this, others crypto exchanges also saw withdrawal of UPI services for transactions, leaving many investors in the lurch.

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