India’s Central Banking Authority the Reserve Bank of India has thrown a final blow at those who deal in cryptocurrencies. In the Press release for First bi-monthly Monetary Policy Statement, RBI has clarified that any entity regulated by RBI shall not provide services to any individual or business that deals with virtual currencies such as Bitcoin.
Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs. Regulated entities which already provide such services shall exit the relationship within a specified time. A circular in this regard is being issued separately. – Press Release
Banks are regulated by RBI and hence we will soon be seeing the banks closing ties with Cryptocurrency related businesses like Fiat-based Cryptocurrency exchanges.
Digital Token by RBI
The same press release talks about a digital token introduced by the Central Bank. An inter-departmental group within the RBI will provide a report on the desirability and feasibility of a Central Bank Digital token. The report will be submitted by the end of June, 2018.
What happens now?
Decentralised networks and assets like Bitcoin cannot really be fully banned. You can still purchase cryptocurrencies on Peer-to-peer exchanges like Local Bitcoins, Instashift and so on.
The biggest concern raised by the central institution and the government has been the use of Crypto-assets for money laundering and scams. Be assured, and this is my personal opinion, that this move of the RBI is only going to increase the use of Cash in buying cryptocurrencies.
The exchanges are a medium to buy and trade cryptocurrencies LEGALLY. Ring fencing the banks from providing services to these exchanges will lead to unnecessary chaos temporarily and move thousands of crores of legal business out of India.
If the government really thinks they can Ban Bitcoin, the joke is on them.
Do not Panic
There is still time for the exchanges to counter this measure. The global market is rising for cryptocurrencies. The banks that currently provide services to Indian exchanges are also still operational and will be given time to stop working with exchanges. So remain calm for now.