The Reserve Bank of India [RBI] has declared that it will be terminating any sort of dealings or business with any individual, group/firm that has to do with cryptocurrencies; while proportionally it announces that there are plans set in motion to debut its own cryptocurrency.
Bitcoin and cryptocurrencies in general have been criticized by India’s Finance Ministry for their lack of intrinsic value in the beginning of the year, and so many financial institutions based in India terminated or limited the flow of work for crypto-related accounts. In early February, false reports in the media of a country-wide crypto ban in early February led to a drop in the crypto markets.
RBI’s statement reads that although the technological innovations that support cryptocurrencies “have the potential to improve the efficiency and inclusiveness of the financial system […] Virtual Currencies (VCs] […] raise concerns of consumer protection, market integrity and money laundering, among others.”
“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.”
The period of time for which firms should relocated is around three months. As RBI regulates all banks in the country, keeping a bank account that trades cryptos will be very difficult.
While the RBI has criticized existing cryptocurrencies like Bitcoin, it has expressed interest in the underlying blockchain technology. Citing the escalating costs of dealing with, transporting, and producing physical money, it has suggested that it may develop its own cryptocurrency as a potential future solution.
If this does come about, the cryptocurrency would be state-backed and therefore act more like a digital version of traditional currencies – similar to e-Krona that the country of Sweden is planning to launch which is supported on the IOTA platform.