Reserve Bank of India Hands the Death Note to Cryptocurrencies in India
RBI said that it will not deal with or provide services to any individual or business entities that deal with virtual currency
Governments across the world have been at war with cryptocurrency for a while now. With the unprecedented rise of Bitcoin followed by a fall, the virtual currency is in a crest and trough motion and a fall seems imminent and inevitable.
In a fresh blow to Bitcoin, the Reserve Bank of India in its Monetary Policy announcement said the Central Bank will not deal with or provide services to any individual or business entities dealing with or settling virtual currencies.
Entrepreneur India takes a look at how it will change the game for cryptocurrency in India.
RBI Says Goodbye to Cryptocurrency
The announcement of RBI’s monetary policy had the attention of all but what stood out was RBI’s strong stand against virtual currencies. The circular stated that virtual currencies “raise concerns of consumer protection, market integrity and money laundering, among others”.
This is not the first time a central bank has snubbed cryptocurrencies. In the past, the RBI has cautioned against trading and using cryptocurrencies and has issued warnings on the use digital currencies like Bitcoin.
In the policy, the RBI has stated, “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. A circular in this regard is being issued separately.”
What the Indian Government Believes
Given the uncertainty and the probability of scams that cloud Bitcoin’s success, it comes as no surprise that the Indian government too is keeping itself away from the cryptocurrency. India has distanced itself from Bitcoin and has openly said Bitcoin cannot be considered as “legal tender”.
During the Union Budget 2018-19, India’s Finance Minister Arun Jaitley clarified the government discourages the use of Bitcoin or any other cryptocurrency. While the government is not inclined to use cryptocurrency, it has acknowledged the positive impact the use of blockchain can bring into various sectors. Government’s policy arm NITI Aayog has said it is actively looking at exploring use cases of blockchain technology.
Bitcoin has been under the government’s scanner since many years now. Two committees were formed in 2017, one in April followed by another in December, comprising of officials from the finance ministry, the RBI, and the Securities and Exchanges Board of India (SEBI) to understand more on Bitcoin.
Where Do Cryptocurrency Exchanges Stand?
According to news reports, India is home to over 10 cryptocurrency exchanges that generate monthly volumes to the tune of INR 10,000 crore, all of this with over five million users across the country. The future of these companies is now uncertain as RBI’s policy clearly states that it will “exit the relationship within a specified time”.
Vishal Gupta, founder of BINEX.Trade and co-founder, DABFI, says this is like a business running without a bank account. However, Gupta is certain that the cryptocurrency exchanges in India will keep pursuing for regulations to come into effect. “When you run a business where you have invested so much, you have to find alternatives for it,” he said.
However it’s not just the craze for Bitcoin in India. Ethereum surpassed Bitcoin as the most searched cryptocurrency in India according to Jana in its latest Mobile Majority report. Ethereum took over 34.4% share of currency whereas Bitcoin stood at 29.9%.
Alerts had been issued by the likes of billionaire Warren Buffet too. Earlier this year, Buffet had asked people to refrain from wasting their time on Bitcoin adding that we are on the top of the Bitcoin bubble.
Indian entrepreneurs like Vijay Shekhar Sharma have welcomed the move by RBI. Sharma took to Twitter and said, “Unambiguous clarification and applaud worthy guidance on #cryptocurrency from RBI.”
In the business of news for 5 years now. Making my way across India thanks to my career. A media graduate from Symbiosis, Pune, I have earlier worked with Deccan Chronicle (South India's leading English daily), T-Hub (India's largest incubator) and Anthill Ventures (a speed-scaling platform).
Stories, movies and PJs are my thing.
If you hear 'The Office' opening score randomly, don't worry it's just my phone ringing.