The Indian Central Bank has given a directive to all banks operating within the country to stop processing cryptocurrency for customers. The policy restricts RBI-regulated institutions from allowing their customers to purchase cryptocurrency and which also bars banks from providing such services to businesses.
In a statement:
“Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated with dealing with such virtual currencies. 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 effect of the ban also restricts traders from depositing fiat currency at cryptocurrency exchanges, forcing them to use peer-to-peer (P2P) trading platforms. LocalBitcoins is a peer-to-peer trading platform whose transactions dominated INR currently account for roughly $1million in volume on a weekly basis.
Blockchain has so many beneficial applications but cryptocurrencies raise a number of issues related to consumer protection, market integrity and preventing financial crimes; the RBI statement acknowledges.
“Technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system,” the RBI said. “However, Virtual Currencies (VCs), also variously referred to as cryptocurrencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others.”
The result of this ban has seen the India-based cryptocurrency trading volume drop by almost 90% in recent weeks as banks have already begun adherence to the non-cryptocurrency transactions and as a result restrict exchanges access to financial services. Although it has not been declared as a Federal Government policy.
Image courtesy: Shutterstock, CoinDance
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