Ever since the news broke that the Reserve bank of India (RBI) did not do its due diligence before imposing restrictions on banks to not have a working relationship with Indian cryptocurrency exchanges, there has been chaos in the community.
Like us, I am sure our readers must have had a few queries pertaining to the central bank’s perplexing stand. We reached out to some lawyers and asked them if the RBI had any right to impose these restrictions in the country.
Although the Right to Information response sent by the RBI answered a lot of pertinent questions, it refused to answer a lot more. The standard reply to the difficult questions, sent was, “What is sought is not information as defined in section 2(f) of the RTI Act 2005.”
To gain a little context Section 2(f) of the RTI Act 2005 says, “Information” means any material in any form, including records, documents, memos, e‑mails, opinions, advices, press releases, circulars, orders, logbooks, contracts, reports, papers, samples, models, data material held in any electronic form and information relating to any private body which can be accessed by a public authority under any other law for the time being in force.”
Does the RBI have the authority to deny information to the public?
Darpan Singhi, an Associate at TRA Law firm which is representing crypto-exchanges and crypto-traders in their Supreme Court challenge to the RBI crypto-ban circular, said, “Under the RTI Act, 2005, all public authorities are required to provide information to the public. The RBI has responded to RTI applications in the past unless it qualifies as an “exception” under the RTI Act. The only cases under which the RBI can refuse to share such information are if the information is (i)prejudicial to the sovereignty of India, (ii) forbidden from sharing by any court, (iii) breaches parliament or state legislature privilege, (iv) is against public interest etc. The RBI is required to answer all questions it receives under the RTI Act, unless covered under one of the exemptions above.”
The questions in the RTI application forms included, if there was no committee constituted by the RBI (to study cryptocurrencies), how did it determine the risk, logical comparisons of dangers associated with net banking, if the RBI ever tried to understand how peer to peer technologies work, among others.
Apart from that, was the RBI authorized to impose restriction on cryptocurrency trading?
Nehaa Chaudhari, the Public Policy Lead at the same firm said said, “The RBI’s authority to regulate the banking sector comes from two legislations – the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949. Neither law contains any requirement that the RBI conduct research on any topic it regulates. So, in that sense, there’s nothing illegal or unconstitutional here. That said, however, for the regulation of crypto-currencies, the Ministry of Finance has constituted two committees – the recommendations of the first committee have not been made public, and those of the second committee are awaited, as far as we know.”
She elaborated that, in such a scenario, where the RBI is but one member of these committees which have been constituted for the specific purpose of framing recommendations on how to regulate crypto-currencies, this ban by the RBI is problematic. The fact that they admit to issuing the ban without having done any research makes it even more problematic. It’s also negatively affecting the perception of the RBI, thus far perceived to be a largely responsible regulator.
Crypto-News India View: Indian government institutions do have the right to refuse to answer questions if those questions endanger the sovereignty of our country, or if they have been forbidden from sharing information by courts, or if it makes India look bad.
Since none of these questions checked any of the criteria above, why the RBI chose to refrain from answering burning questions, is a burning issue.
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