The India Supreme Court ruled that it was impermissible for the Reserve Bank of India to prohibit entities it regulates (e.g., banks) from providing any services to individuals or businesses dealing with or settling virtual currencies. In so ruling, the Court confirmed the “wide” power of the RBI to potentially prohibit its regulated entities from conducting business that it determined was highly risky in light of “the special place and role that it has in the economy of the country.” However, the Court noted that “the availability of power is different from the manner and extent to which it can be exercised” and in the current instance, the RBI’s exercise of its authority was not proportionate to any demonstrable harm. Here, said the Court, “RBI has not come out with a stand that any of the entities regulated by it … has suffered any loss or adverse effect directly or indirectly on account of the interface that [virtual currency] exchanges had with any of them.”

In other legal and regulatory developments impacting cryptoassets:

  • ESMA Head Stresses Need for Harmonized EU Approach to the Regulation of Cryptoassets: Steven Maijoor, Chair of the European Securities and Market Authority, stressed the need for a “common, holistic approach” to the oversight of cryptoassets, in a speech last week before the Fourth Annual FinTech and Regulation conference in Brussels. He said it was important to ensure “the right level of protection without stifling innovation.” He specifically acknowledged the potential benefits of global stablecoins, including the promotion of financial inclusion and the potential to make global cross-border payments “easier, cheaper and quicker.” However, he cautioned that, although stablecoins may not constitute legal tender, they might, like Libra, be a “currency of [their] own.” All cryptoassets, he said, should be regulated in accordance with the risks they raise on a case-by-case assessment. 

  • FCA Warns Investors That Renowned Cryptoasset Exchange Operates in UK Without Requisite Authorization: The UK Financial Conduct Authority issued a warning that it believed that Bitmex has been providing financial services in the United Kingdom without appropriate authorization. The FCA issued a similar notice regarding Kraken on March 3, but quickly removed the warning from its website without explanation. As of January 10, 2020, all UK businesses engaged in cryptoasset exchange provision services, including issuing new cryptoassets or providing custodian wallets, must comply with UK AML requirements. (Click here for background in the article” FCA Designated AML Supervisor of Many UK Digital Asset Activities” in the January 19, 2020 edition of Bridging the Week.)