RBI Bans Indian Banks From Facilitating Services To Crypto Related Individuals & Businesses

RBI - Reserve bank of India cryptocurrency statement

  1. Bitcoin and other cryptos are not banned in India.
  2. You can still use Bitcoin to pay someone or to receive money. Just like any P2P payment.
  3. Soon you might not be able to withdraw money from Indian Crypto exchanges in INR.
  4. We may expect to see some currency like USDT for Indian citizens. The only problem is liquidation that could be fixed by using DEX like BiSQ or by using a P2P website like Localbitcoins.
  5. The price will be affected in Indian crypto market for a bit. However, this will not last long as Indian crypto market is just a fraction of the global market.
  6. Personally, I believe this will put us back in the 2014-15 mode where buying/selling Bitcoin was not possible or as easy on exchanges.
  7. The government has taken this step to curb down growing crypto scams in India. Moreover, the government’s fear of money laundering is real but this move is not justified. As many countries of the world like Japan, Australia, USA are adopting and creating an ecosystem for the growth of crypto economy and technology, this step will put a big dent in the growing crypto and also blockchain sector of the Indian market.

Breaking news!

The crypto saga of India continues.

RBI today wrote in its press release that they are thinking of introducing ‘Central Bank Digital Currency’ in India.

“Rapid changes in the landscape of the payments industry along with factors such as the emergence of private digital tokens and the rising costs of managing fiat paper/metallic money have led central banks around the world to explore the option of introducing fiat digital currencies. 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.” (Source)

So you see India is planning to launch its own fiat like cryptocurrency and of course.

It gets interesting.

As there is more in the Pandora’s box of RBI because they have started ring-fencing regulated entities from virtual currencies.

And guess who the regulated entities are! Of course, the banks through which you do your NEFTs to Zebpay or Unocoin like services.

Their statement said:

Technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system. 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.

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. A circular in this regard is being issued separately. (Source)

Now, what does this means?

It means banks that are in the relationship with Indian exchanges like BitbNS, Unocoin etc can be hit hard as banks will stop providing services to them. Also, the investors will not be able to wire transfer money in their fiat accounts to buy cryptocurrencies in exchange, if this turns out to be true.

Earlier in February 2018, the Finance Minister of India sent a wave of FUD amongst the crypto community in India which was misinterpreted by the mainstream media.

He said:

The Government does not consider Cryptocurrencies “as Legal Tender or Coin” and will take all measures to eliminate the use of these Crypto Assets in Financing “Illegitimate Activities” or a Part of the Payment System.

Which further meant that cryptocurrencies like Bitcoin are not banned India but the Indian government will be consciously cracking down the illegal activities that happen via BTC or other cryptocurrencies and this is similar to keeping a check on illegal activities in USD or INR terms. (Read the backstory here: Is India Banning Cryptocurrencies? Here Is The Truth)

But this time the RBI has directed RBI regulated entities to stop servicing individuals or businesses dealing with or settling virtual currencies like BTC or ETH, with immediate effect.

Believe it or not, it can have serious repercussions in the market and cause further plump in the market of crypto which has been struggling for the past two months.

My Thoughts on Reserve Bank of India (RBI) Limiting the future of Crypto in India

It is naive to announce the contemplation of your own digital currency and simultaneously stopping the growth of other decentralized cryptocurrencies like BTC or ETH in the India market.

However, it will not stop the crypto market but we can surely see some drop and loss of confidence as this news spreads like wildfire.

This step by the government will also encourage peer-to-peer cash dealings through services like LocalBitcoins which has already proven dangerous in India.

I think if this is acted upon seriously and if the banks stop servicing Indian Bitcoin exchanges, a huge black market of crypto will emerge which will be even more difficult to regulate or control.

With this, let us see how the scenario evolves in India in a few days from now but a word of caution again from CoinSutra: Never invest more than what you can afford to lose and always following the basic investing principles.

Let us know your thoughts: What do you think about this step by the RBI? Is it good or bad? Will you buy cryptocurrencies if this happens to be true? How are you going to buy cryptos from now? 

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6 thoughts on “RBI Bans Indian Banks From Facilitating Services To Crypto Related Individuals & Businesses”

    1. @Rajat
      It is as this won’t affect the global market. The only challenge is to liquidate it if especially you have a huge amount. However, there will always be a solution for this. We will share some when we have something concrete to share with you.

  1. Do you think that government is creating a FUD so that it can have monopoly over virtual currencies in India, when and if it releases its own cryptocurrency in India?
    As time and again, Indian government has shown interest in cryptocurrencies and its technology.

    1. @Amit
      I wish it could be something like what happened in South Korea. However, it doesn’t seem like. Especially because of too many scams and MLM happening under the banner of Bitcoin and Crypto all over the country. Government interest is to protect those innocent citizens who are being lured with ‘get rich quick’ scheme.
      However, do not worry as there is always a way out with everything. Moreover, a lot of petition is being filed and that will make a lot of difference in the coming days. Lets wait and watch to see what happens next.

      1. Sure, proper education is the best way to prevent innocent people from all these MLM frauds.

        That is why your blog plays a vital role to empower the ordinary people with knowledge of cryptocurrencies in India.

        If all those who were scammed had proper knowledge, they would not have fallen for it, and Indian government may not have taken such strict actions against local crypto exchanges.

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Howdy, Welcome to the popular cryptocurrency blog CoinSutra. Here at CoinSutra, we write about Bitcoin, wallet management, online security, making money from Bitcoin & various aspects of cryptocurrencies. You can read more about CoinSutra on the “About” page.
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