Appalling Regulations on Cryptocurrency By RBI

The Reserve Bank Of India has come up with certain policies on Thursday’s meeting under Urjit Patel. RBI has banned buying cryptocurrency via banks or e-wallets with immediate effect. So, you will not be able to buy cryptocurrency via banks or e-wallets etc. in India anymore. Reserve Bank of India (RBI) has banned crypto with immediate effect from “dealing with or providing services to any individuals or business entities dealing with or settling virtual currencies”. The central bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated with dealing with such virtual currencies.

The Deputy Governor BP Kanungo told reporters during the customary post-policy address that banks, NBFC’s and corporates should refrain from dealing with cryptocurrency’s as it could create ripples in the markets. However, blockchain wins the race as the central bank believes that it has the ability to boost the financial markets. Kunungo said “Digital tokens issued by the private parties are getting international attention for quite some time for their speculative value. Internationally, while the regulatory responses of these tokens are not uniform. It is universally failed that they can seriously undermine the AML and FATF, adversely impact the market integrity and capital controls and if they grow beyond a critical size they can endanger financial stability as well. Now, we have decided to ring-fence the RBI regulated entities from the risk of dealing entities associated with virtual currencies. They are required to stop of having the business relationship with the entities dealing with virtual currencies forthwith and unwind the existing relationship in a period of 3month’s time. We have constituted the interdepartmental committee and the Reserve Bank India will produce a report and further, we explore the feasibility and desirability of issuing the digital currency by the Reserve Bank Of India and the Central Bank will guide us by submitting the report by June in this matter. However, we also recognize that the blockchain technology or the distributed ledger technology that underlies beneath the virtual currencies have potential benefits for financial inclusion and enhancing the efficiency of the financial system and we also believe that they are encouraged to be exploited beneficially to the economy”. He further, added that partaking such “Fiat” digital currency will also lessen the cost of printing and circulating paper currency, which will constitute the liability of the central bank and will be in circulation in addition to the paper currency.

In the Budget speech on February 1, Finance Minister Arun Jaitley, had said that cryptocurrencies are not legal and affirmed to eliminate their usage, resulting in what is reported as a “chill” in the trading activity.

Since then, top banks, including HDFC Bank, SBI, and the American lender Citi, have virtually stopped supporting cryptocurrencies related transactions, resulting in what reports said as a 90 percent dip in trading.

Although, RBI has ring-fenced Crypto trading by not letting banks participate in businesses with Crypto trading related exchanges in India. This decision is by the RBI for banks only, bitcoin and other crypto assets are still unregulated, and a proper regulation is expected in June by the central government, which is likely to be positive because majority of the G20 nations have positively regulated digital currency and India is likely to regulate it positively because of the revenue it has been collecting on bitcoin-related assets. Your funds are totally safe and the RBI has given 3months to the banks to deal with the situation. Hence, I request all investors and clients not to panic and wait for further regulations in June before taking any decision said Sidharth Sogani from Block Next Solutions LLP…

​Regards,

Heena Gupta

(Content writer, Block Next Solutions)

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