Tough RBI stance leads cryptocurrency dealers to foreign shores

Randolph Lopez
April 8, 2018

The Reserve Bank of India (RBI) has effectively banned any dealings in cryptocurrency via banks or e-wallets in the country stating "dealing with or providing services to any individuals or business entities dealing with or settling virtual currencies". It does not mention that a copy of it can not be stored overseas, according to Medianama.The RBI will issue detailed instructions by next week.

Though the directive has come into effect, it is important to note that banks and non-banking entities have been given three months to conclude their dealings in digital currency. The report will be submitted by end-June 2018.

The RBI has repeatedly cautioned users, holders and traders of digital currency, and even gone to the extent of calling bitcoins a ponzi scheme. While the security features intact in the blockchain technology have been acknowledged by the Finance Minister himself, the latest mandate by the Reserve Bank of India, discouraging Indians from dealing in cryptocurrencies, is quite disheartening.

"There are no proven instances of cryptocurrency aiding illegal activities, and the debilitating environment created for cryptocurrencies in India will only force Indian investors and exchanges look towards other countries for trading in bitcoin and other cryptocurrencies", said Ritesh Modi, Blockchain expert and author. In a major blow to bitcoin transactions in the country, the RBI has barred regulated entities, including banks, from providing services to any individual or business dealing in digital currencies.

It has set up a panel to investigate cryptocurrencies and plans to appoint a regulator to oversee unregulated exchanges. Praveen Kumar, founder of the Singapore-based crypto-currency exchange Belfrics, called it a "bad move".

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"Rapid changes in the landscape of the payments industry along with factors such as emergence of private digital tokens and the rising costs of managing fiat paper/metallic money have led central banks around the world to explore the option of introducing "fiat" digital currencies," the RBI said.

This, however, doesn't necessarily mean that any sort of ban on cryptocurrencies will follow.

Sentiment was also positive ahead of the RBI's monetary policy announcement due later in the day with traders expecting the central bank to sound less hawkish, thereby pushing back rate hike fears.

In an effort to reduce corruption, Indian authorities in 2016 said they would withdraw all 500 and 1000 rupee banknotes from use-rendering some 85% of all currency in circulation worthless overnight, unless deposited at a bank.

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