A recent announcement by the Reserve Bank of India (RBI), India’s central bank, statest hat RBI-regulated organizations can no longer allow their customers to purchase cryptocurrencies, while banks will have to stop helping businesses deal or settle in cryptocurrencies.
This, however, doesn't necessarily mean that any sort of ban on cryptocurrencies will follow. In fact, the bank has even added that it is planning on releasinng their own cryptocurrency. RBI's main issue with cryptocurrencies is that they raise various concerns regarding consumer protection. Nevertheless, the central bank does acknowledge the potential cryptocurrencies have when it comes to improving transaction efficiency.
The financial instruction reminded Indian residents it has in the past issued multiple warnings regarding cryptocurrencies and the risks associating with them. Because of these risks, RBI claims, it decided to halt crypto-related services. The warning reads:
“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.”
The decision’s effect is immediate, as all those dealing with cryptocurrencies will no longer see banks facilitate their services. Yet, the central bank has provided those who wish to continue their collaboration a three-month deadline to stop using cryptocurrencies when transacting with banks.
RBI's deputy governor, Bibhu Prasad Kanungo, has stated in a press conference that the crypto industry has the potential to endanger the country’s financial stability. Another concern, according to the deputy governor, is that cryptocurrencies might end up undermining anti-money laundering efforts, as well as the Financial Action Task Force’s framework.
Concerns Regarding A Cryptocurrency Ban
The crypto community initially believed the move could lead to a full-on cryptocurrency ban in India. Because of this, Panjak Jain, who works as an advisor and investor, posted a tweetstorm regarding the issue. He stated that, despite this decision, the country has no plans to ban cryptocurrencies.
2/ However, they just made it impossible to convert $BTC $ETH $LTC or any #crypto to fiat in the country. It seems like this was in response to the recent arrest of a known scammer in India who fled the country and was arrested in Bangkok— Pankaj Jain (@pjain) April 5, 2018
RBI has even added in one of their statements that they plan to launch their own cryptocurrency. It’s set to be a state-backed currency, and will be used along with the country’s fiat currency.
8/ The Indian crypto market is still pretty small but offers a lot of future growth and opportunities, especially for the unbanked. I hope the RBI and the rest of the Indian government rethink this decision and take a more positive approach towards #crypto.— Pankaj Jain (@pjain) April 5, 2018
The bank recognizes rapid changes are occurring within the payment industry, and claims it plans to embrace these changes, rather than turn its back on them. By, which would be easily stabilized, and would even red introducing a state-backed currency, RBI would be able to reduce the costs of printing paper money.