Friday, December 9, 2022

RBI Orders Banks to Cut Strings With Crypto Businesses

RBI Orders Banks to Cut Strings With Crypto Businesses

India’s central bank, Reserve Bank of India (RBI), has barred all entities regulated by them — including banks and financial institutions — from providing services to businesses that deal with virtual currencies. The RBI has supplied three months of settlement period for these entities to square their business partnerships with crypto businesses or individuals.

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No More Banks in Crypto Space

The RBI has repeatedly warned citizens to tread cautiously when it comes to cryptocurrencies.

Accordingly, the just RBI released a press note, stating:

“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 [virtual currencies]. Regulated entities which already provide such services shall exit the relationship within a specified time. A circular in this regard is being issued separately.”

RBI is taking action at a time when governments globally are trying to regulate the nascent cryptocurrency industry. In past few months, several private banks in the country have barred the use of credit and debit card for the purchase of crypto. Moreover, accounts of several crypto exchanges were closed by banks, forcing them to move to smaller banks.

Ajeet Khurana, Head of Blockchain and Cryptocurrency Committee of India (BACC), said the move is disconcerting:

“Without any clear mandate either from the RBI or other regulators, asking us to close down our (exchange) accounts while refusing to give in writing what the reason is just disruptive to our business.”

RBI Mulls Over Fiat-Based Digital Currency

In its press release, the RBI noted that it has contemplated introducing a fiat-based digital currency that is fully regulated. It also highlighted that the Reserve Bank will issue a report  “on the desirability and feasibility to introduce a central bank digital currency” by June 2108.

Following the announcement by the Central Bank of India, a petition was filed on by an unverified user, to change the way Indian government handles the matter of virtual currencies. According to the petition, the decision from RBI cuts the wings of entrepreneurs who strive to work on cryptocurrency and blockchain technology projects.

Additionally, the petition highlights how the crypto market could raise jobs and also aid the economy.  It is evident that the Indians are enthusiastic about the cryptocurrency revolution but repeated warnings from the government have caused fear among the people.

Is it fair for the RBI to ask banks to not serve crypto businesses?  Share your views in the comments section.

Images via Quartz, Livemint

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