The Reserve Bank of India (RBI) said it had not banned cryptocurrencies such as Bitcoin. It says it has only “ring-fenced” regulated entities from associated risks, The Economic Times reported.

The statement was in an affidavit filed with the SC against a petition filed by the Internet and Mobile Association of India (IAMAI).

Adding that it was not against technological innovation, the RBI noted that only regulated entities such as banks were ring-fenced from risks such as terror financing and money laundering through cryptocurrencies, the paper added.

IAMAI filed a petition with the Supreme Court objecting to a 2018 RBI circular which stopped regulated entities from dealing in cryptocurrencies. The RBI then filed a 30-page affidavit with the SC in September, ET reported.

During the hearing earlier this January, the body claimed the move had effectively banned legitimate business activity via the virtual currencies (VCs). The next hearing is scheduled for January 21.

The affidavit, accessed by ET said: “RBI has not prohibited VCs in the country … has directed the entities regulated by it to not provide services to those persons or entities dealing in or settling VCs … The RBI has been able to ring-fence entities regulated by it from being involved in activities that pose reputational and financial risks along with other legal and operational risks.”

RBI and IAMAI did not respond to ET's queries.

The affidavit further showed that in discussions with the government, the RBI had recommended prohibiting initial coin offerings (ICO) and VC asset funds within India. Other suggestions included an enhanced Foreign Exchange Management Act to trace VC-based investments under the Liberalised Remittance Scheme.

The scheme allows Indians to send $250,000 abroad in a year.

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