Reserve Bank Bars Bitcoin Trading

Investors will no longer be able to buy bitcoins through their bank accounts or digital wallets. In a major blow to bitcoin transactions in the country, the RBI has barred regulated entities, including banks, from providing services to any individual or business dealing in digital currencies. The central bank has asked banks to end all existing relationships with bitcoin players.

“Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in 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,” RBI said.

But at the same time, the RBI has said it will look at the feasibility of floating its own crypto-currency or digital currency in the near future.

“While many central banks are still engaged in the debate, an inter-departmental group has been constituted by the Reserve Bank to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency. The report will be submitted by end-June 2018,” it added.

Experts feel the RBI order will either completely shut down crypto-exchanges such as Zebpay, Unocoin, Coinex and Bitcoin India among 55 others, or they might trade using different cryptos: a user might buy bitcoin in exchange for other altcoins like litecoin or ripple.

Zebpay said it was studying the RBI order. Praveen Kumar, founder of the Singapore-based crypto-currency exchange Belfrics, called it a “bad move”. Users will continue to buy through P2P platforms, which are not present in India, he said.

Experts say the RBI may be thinking of launching a non-mineable digital coin. Such currencies require one to buy the coins and earn interest by holding them in one’s wallet. The more coins you hold, the higher your interest rate.

Vivek Sancheti, a Bitcoin expert, said: “From what we read from the RBI statement is that they might get into a non-mineable digital currencies. I don’t think RBI will use its resources in mining crypto-currencies.”

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 cannot be recognised as a legal tender. Besides, in the last few weeks, several other countries, including Japan, has also warned its people against the use of crypto-currencies.