RBI Bans Regulated Entities From Dealing In Virtual Currencies | India’s Central Bank To Stop Dealing With All Crypto-Related Accounts, ‘Not Ban On Crypto’ Commenters Say

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Indian Government Bans CryptoCurrency
INDIAN GOV BANS CRYPTOCURRENCIES
India virtually banned cryptocurrencies like bitcoin with the Reserve Bank of India barring regulated entities from providing services to any individual or business dealing in digital currencies.

The central bank has given three months to regulated entities like banks to unwind their positions with the entities related to cryptocurrencies, RBI Deputy Governor BP Kanungo said in a media conference. The regulator, however, decided that it will promote the use of blockchain – a public ledger that serves as the backbone of bitcoin – in financial services for strengthening transparency and improving inclusion.

The central bank’s move comes after at least three warnings to the public at large for being cautious while dealing with cryptocurrencies.

If they (cryptocurrencies) grow beyond a critical size they can endanger financial stability

BP Kanungo, RBI Deputy Governor

The move comes as governments around the world are stepping up scrutiny of virtual currencies mainly due to their unregulated nature. The meteoric rise in the value of bitcoin in 2017, the most popular cryptocurrency, triggered worries that such currencies could facilitate everything from money laundering to tax evasion and fraud.
Since reaching a peak of almost $20,000 in early December last year, a series curbs have pulled down bitcoin and rival cryptocurrencies, with losses intensifying since the start of 2018. China, once a global hub for cryptocurrency trading, is now leading the crackdown making them illegal. Japan and South Korea too have put in place a number of regulations.
Finance Minister Arun Jaitley had already earlier said that the Indian government doesn’t consider cryptocurrencies as legal tender and will take all measures to eliminate payments using them.
RBI said that it will issue detailed guidelines in a circular soon.
India isn’t giving up on the idea of a virtual currency completely. In line with central banks around the globe, the RBI too is mulling introducing a fiat digital currency. “These are issued by the central bank and are considered the liability of the central bank,” Kanungo said. “They will be in circulation in addition to the paper currency that we have. It also holds the promise of reducing the cost of printing notes.”

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Accordingly, the RBI has constituted an interdepartmental committee that will submit a report on the feasibility of a fiat digital currency. The committee will submit its report by June-end.

‘Crypto-Demonetisation’

The move has a “demonetisation” like effect on cryptocurrencies, according to Vishal Gupta, co-founder of the Digital Assets and Blockchain Foundation of India. “That effectively means people lose ability to conduct any trade or exchange, at least in the open market,” he told BloombergQuint in an interview.

These have become dead assets for people who are holding onto them. This is going to have huge repercussions. If you disallow trading there is no exit to this. 

Vishal Gupta, co-founder, DABFI

“I personally believe they [RBI] will give some relief,” he added.
Source: bloombergquint
India’s Central Bank To Stop Dealing With All Crypto-Related Accounts, ‘Not Ban On Crypto’ Commenters Say
The Reserve Bank of India (RBI) has announced that the bank will no longer provide services to any person or business that deals with cryptocurrencies, adding that it is also looking into releasing its own cryptocurrency in the future, according to a “Statement on Developmental and Regulatory Policies” released today, April 5.
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. 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.”
RBI continues by noting that they have already warned those involved in the crypto industry several times of the “various risks” of dealing with cryptocurrencies before stating finally that:
“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.”
According to local news India, the period of time for businesses to extract themselves from the crypto sphere is three months.
At a press conference today, Bibhu Prasad Kanungo, the deputy governor of RBI, said in regards to the decision that cryptocurrencies have the potential to “endanger financial stability:”
“Internationally, while the regulatory response to these tokens are not uniform, it is universally felt that they can seriously undermine the AML (anti-money laundering) and FATF (Financial Action Task Force) framework, adversely impact market integrity and capital control. And if they grow beyond a critical size, they can endanger financial stability as well.”
Panjak Jain, who works in Blockchain and crypto communities in India as an investor and an advisor, posted a series of tweets today about the new RBI crypto regulations, underlining that the Indian government “hasn’t banned crypto:”
1/ Today the Reserve Bank of issued a circular telling “entities registered with the RBI” (essentially banks, financial firms) to stop working with crypto exchanges and businesses. The Indian government, hasn’t banned .
Jain’s further tweets note that “the Indian government is obviously not coordinating amongst the various parts of the government,” citing that income tax is being collected on crypto traders, and adding that it is “interesting” that “RBI cut off fiat from crypto exchanges that have been following fairly good KYC/AML practices used by Indian institutions:”

7/ The Indian government should consider putting broad rules in place to allow the legal use and trading of like . Instead, they are going to push more people towards using OTC cash markets which is the complete opposite of what the @narendramodi wants.
8/ The Indian crypto market is still pretty small but offers a lot of future growth and opportunities, especially for the unbanked. I hope the RBI and the rest of the Indian government rethink this decision and take a more positive approach towards .
Meanwhile, the same RBI statement on the end of its association with crypto dealings adds that the bank will be looking into creating its own state-backed cryptocurrency, “in addition to the paper currency that we have,” Kanungo notes, with a report to be submitted on its feasibility by the end of June 2018.
RBI’s interest in their own cryptocurrency is due to the “rapid changes in the landscape of the payments industry along with factors such as emergence of private digital tokens and the rising costs of managing fiat paper/metallic money,” which they cite as the impetus for central banks around the world to introduce “fiat digital currencies.”
Kanungo adds that a state-backed cryptocurrency could “hol[d] the promise of reducing the cost of printing of notes.”
Sathvik Vishwanath, the co-founder of India’s Unocoin, told Quartz India that he doesn’t believe this is the “right direction that the central bank has taken:”
“This will cause panic among a few million people in India who are already using cryptocurrrencies [sic]. If they want to launch their own digital currencies, they don’t need to ban existing ones.

Source : cointelegraph

CHIKKA PRASANNA KUMAR

I’m CHIKKA PRASANNA KUMAR, a Professional Blogger from Telangana, India. Founder of We Shout Loud.

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