India's Central Bank Turns Its Back On Crypto-Related Accounts

Ali Raza
  • India's central bank announced organizations it regulates will no longer serve clients on cryptocurrency-related services
  • This means Indian residents will no longer be able to convert cryptocurrencies to fiat and vice-versa through exchanges in the country
  • Commenters point out this isn't a ban on cryptocurrencies.

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.

RBI's Decision

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.”

RBI's announcement

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.

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.

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.

Vietnam to Soon Have a Fully-Authorized Cryptocurrency Exchange

Vietnam is reportedly set to soon have a fully-authorized cryptocurrency exchange, as two firms in the country have recently signed a memorandum of understanding (MOU) for the production of a crypto trading platform, after obtaining a license for it.

According to a recently published press release, the largest distribution company in Vietnam, the Linh Thanh Group, is going to develop the trading platform along with Switzerland-based blockchain firm KRONN Ventures AG.

The move comes after KRONN Ventures formed a consortium with financial committees from various Asian countries, including Vietnam, Cambodia, Bangladesh, and Sri Lanka. Its goal was to “build an international wiring system using blockchain technology that fits with the Asian environment.”

The document notes that an official statement from the Linh Thanh Group has stated that working with KRONN Ventures will see both create “world-class cryptocurrency exchange,” as the latter is “known widely as a leader in blockchain technology in Switzerland.”

It adds:

The industry expectation is that by combining Linh Thanh Group's massive distribution network, which is the largest in Vietnam, with the world-class technology of KRONN Ventures, the impact will be widely felt not only in Vietnam but also in other surrounding Asian countries.

Notably, the Vietnamese government has last year seized the domain of the country’s oldest bitcoin exchange, after it was accused of providing e-commerce services without registering with the government.

The country’s Ministry of Justice has, back in November, suggested several ways cryptoasset could be regulated in the country. At the time Nguyen Thanh Tu, the director of the nation’s Department of Civil and Economic Laws, said authorities carefully examined the pros and cons of regulating cryptocurrencies.

 This, even though the government has been looking to ban bitcoin mining machine imports. The move was, at the time, being justified by the potential use of cryptocurrencies in illicit activities.