RBI Regulated Organisations Barred From All Cryptocurrency-Related Services

The RBI said: "Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies". "A circular in this regard is being issued separately", added the note. "With the massive surge in the popularity of crypto currencies such as bitcoin, India has also jumped into the market with country's own cryptocurrency called, "Laxmicoin".

The RBI has asked all the financial institutions who are presently providing service related to virtual currencies to wind up such services in the next three months. The report will be submitted by the end of June 2018. Even launched in 2012, it is now gaining limelight for not so right reasons as desi crypto coins are considered a little dubious, said professor Pradeeptha Sethi, a former banker and expert in financial market infrastructure.

India's Finance Ministry had criticized Bitcoin (BTC) and cryptocurrencies for their "lack of intrinsic value" in January of this year, and the month saw several large Indian banks close or limit the functionality of crypto exchange accounts.

The central bank also said that in light of the emergence of private digital tokens and rising costs of managing fiat paper and metallic money, central banks around the world are exploring fiat digital currencies and it would explore the same.

"We have made a decision to ring-fence the RBI regulated entities from the risk of dealing with entities associated with virtual currencies".

It has set up a panel to investigate cryptocurrencies and plans to appoint a regulator to oversee unregulated exchanges.

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The RBI moves comes at a time when banks already battling near-record levels of soured loans are staring at an increase in stressed assets after a rule change announced in February.

RBI's move to clamp down on the crypto-currencies comes two months after Finance Minister Arun Jaitely in his Budget speech said digital currencies can not be recognised as a legal tender.

Apart from this, none of the currencies or exchanges have been banned in the country, and numerous bigger ones would likely continue existing in the capacity of cryptocurrency wallets.

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

This isn't the first time the central bank has been critical of cryptocurrencies. The digital payments ecosystem in the country has grown owing to the rise of new payment systems, players and platforms.

(Copyright © 2015. All Rights Reserved.)
 
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