India’s central banking authority, the Reserve Bank of India (RBI), has announced that it will cease doing any sort of business with anyone or any business that deals with cryptocurrencies. In the same breath however, it has made it clear that plans to create its own cryptocurrency continue unabated.
India’s Ministry of Finance has previously criticized Bitcoin for its volatility and lack of “intrinsic value,” as CoinTelegraph highlights, but this latest move by the RBI is the most impactful yet. It has given those currently involved in the cryptocurrency trade within India three months to sell off their remaining assets or relocate their business, as from that point the RBI will not support the trade of cryptocurrencies.
The reasoning behind this move is said to be over “concerns of consumer protection, market integrity, and money laundering.” That last point was doubled down on in a press conference, where the deputy governor of the RBI said that cryptocurrencies undermined efforts to prevent money laundering. He also said cryptocurrencies have the potential to “endanger financial stability” if allowed to grow too large.
Although the move doesn’t outright ban cryptocurrencies — doing so would be rather difficult, anyhow — this end of service support is likely to have a big impact on India’s use of cryptocurrencies. The RBI regulates all banks within the country, so maintaining a bank account in India while trading in cryptocurrencies will be exceedingly difficult.
This comes at a strange time in India since, while the RBI has criticized existing cryptocurrencies like Bitcoin, it has expressed interest in the underlying blockchain technology. Citing the escalating costs of dealing with, transporting, and producing physical money, it has suggested that it may develop its own cryptocurrency as a potential future solution.
If this does come about, the cryptocurrency would be state-backed and therefore act more like a digital version of traditional currencies, with little decentralization. In that fashion, it might operate a little like the Ripple (XRP) cryptocurrency, which has received a good deal of support from banks and governments in other countries.
For now, many Indian cryptocurrency users and evangelists hope that this decision of a block of services to crypto-users is overturned. As one crypto-economist pointed out, making it hard to buy cryptocurrencies with bank transfers is just more likely to see people use peer-to-peer trades and over-the-counter cash transactions, which are far harder to regulate.
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 #crypto.
— Pankaj Jain (@pjain) April 5, 2018