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.

OneCoin Denies Being a ‘Hybrid Ponzi-Pyramid Scheme’

The controversial OneCoin organization has recently responded to the Central Bank of Samoa, claiming it isn’t a “hybrid ponzi-pyramid scheme” as it doesn’t fir the definition of these schemes, and that it is a centralized, closed cryptocurrency.

According to the Samoa Observer, the Central Bank of Samoa claimed OneCoin is a “hybrid ponzi-pyramid scheme” that “laundered money through New Zealand to Samoa.” It also claimed the organization was targeting local residents through churches.

The organization, widely believed to be running a pyramid scheme using the cryptocurrency space, sent a statement to the Observer defending itself, claiming it’s neither a pyramid nor a Ponzi scheme. It’s worth noting individuals associated with OneCoin have been arrested and charged in various countries, including China and India.

In its response, OneCoin argued that Ponzi schemes see the revenue of old investors be “generated through the investment of new investors,” and that it doesn’t require its agents, known as Independent Marketing Associates (IMAs), to recruit others in order to earn bonuses.

Its defense revolves around IMAs not being “obliged to incur any additional expenses or recruit a new IMA,” and that they are rewarded for the “value of [their] sales,” not for recruiting new agents.

The organization added pyramid scheme regulations are these for “consumer protection,” and that its IMAs aren’t consumers. This, as when they join the organization they sign a contract classifying them as “self-employed business owners.”

The users which are part of the OneLife Network are NOT consumers. They are IMAs, meaning they are self-employed business owners.

As CoinDesk notes, OneCoin argues it isn’t a pyramid scheme because its agents aren’t seen as consumers and, as such, it can’t be classified under a dictionary definition of a pyramid scheme, and doesn’t force its IMAs to recruit new agents, although they’re incentivized to do so.

OneCoin, instead, argue it is a “centralized, closed cryptocurrency” with strict anti-money laundering (AML) and know-your-customer (KYC) rules, which make it “much more compliant than decentralized [cryptocurrencies].”

As reported, OneCoin’s leaders Ruja Ignatova and Konstantin Ignatov were recently indicted by the U.S. Attorney for the Southern District of New York (SDNY) on charges of wire fraud, securities fraud, and money laundering. Konstantin was arrested in March of this year.

Moreover, earlier this month former OneCoin investor Christine Grablis filed a lawsuit against the organization’s promoters, with Grablis’ attorney claiming OneCoin’s founders created a multi-billion dollar ‘cryptocurrency’ company based completely on lies and deceit.”