RBI Issues Order to Stop Banks from Servicing Cryptocurrencies

This is arguably the death knell for Bitcoins and cryptocurrencies in India.

If you follow the media and news reports, Bitcoin is banned multiple times a year. However, this time the news comes straight from the RBI (Reserve Bank of India) with their press release statement on Developmental and Regulatory Policies.

rbi orders banks to stop accepting bitcoin
Official RBI Press Release

What this means for Bitcoin

While Bitcoin and cryptocurrencies haven’t explicitly been outlawed in India, this gives regulated banks and institutions a three month period to stop all dealings with individuals and business entities regarding virtual currencies. This notice affects the entire cryptocurrency community, most notably large exchanges like Zebpay and Unocoin.

The source for the 3 month notice period is B P Kanungo, deputy governor of RBI.

There were already reports of credit card companies denying transactions to cryptocurrency exchanges, but in the next few months it seems this order will put a blanket ban on trading cryptocurrencies with Indian rupees.

One thing to note is that this RBI order doesn’t outlaw or criminalize holding virtual currencies like Bitcoin. Instead it puts the onus on financial institutions to abide by the three month notice period and shut down operations with cryptocurrency-related entities. If enforced properly, this means that users won’t be able to exchange their virtual currency assets for Indian rupees after this period.

We’re yet to see how this announcement is met by major cryptocurrency players, especially India’s largest exchanges.

Future of Cryptocurrency in India

Cryptocurrency regulation has been a fickle topic in every country. With India’s central bank finally coming out with a verdict, expect major changes to the current crypto climate. Indian exchanges might choose to move offshore and stop trading virtual currencies with INR, similar to the largest crypto exchange in the world, Binance. This may also lead to another global cryptocurrency price drop (though that’s been happening for a while now.)

The future of blockchain technology in India isn’t in cryptocurrencies but in the technology itself. In the same press release, the RBI came out in support of blockchain tech and distributed ledger technology. In fact, they’ve revealed their thoughts on trying to create India’s own government backed digital currency, something that’s still in its quite early stages.

Written by Upamanyu Acharya

I founded Fynestuff. I play games, write tech articles and look towards putting Buzzfeed out of business someday. Let's talk about crypto: upamanyu@fynestuff.com

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