RBI Bars Banks From Doing Business With Crypto Firms

NEWS
Annaliese Milano
Apr 5, 2018 at 15:31 UTC  |  Updated  Apr 5, 2018 at 15:34 UTC

India's central bank said Thursday that the banks and financial institutions it oversees will no longer be allowed to work with cryptocurrency exchanges and other related services.

"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 [cryptocurrencies]. Regulated entities which already provide such services shall exit the relationship within a specified time," the Reserve Bank of India said in its statement.

According to the Indian business newspaper Financial Express, RBI Deputy Governor BP Kanungo told reporters on Thursday that the "specified time" would be three months.

The news renewed concerns that India was moving to impose an outright ban on cryptocurrencies, though a panel formed last year to study potential regulations has yet to release its findings or any proposals. In recent months, officials in India have publicly stated that the government does not recognize bitcoin as a form of legal tender.

At least one cryptocurrency exchange in India has downplayed the significance of the move. According to a statement published on Twitter, PocketBits argued that exchanges in the country have largely been cut off from banking access already.

"We cannot comment on the times ahead but there is no need to panic, RBI has just reiterated what they have already implemented, THERE IS NO BAN ON BITCOIN in India as of yet, there is no official stand of the government on this," the exchange said. "This is just the Central Bank of India taking a stand against a technology which they are going to implement themselves in terms of a Digital Rupee."

The Bank has previously issued warnings on cryptocurrencies, the first of which was published in 2013. It released a new warning in December, cautioning consumers that it had not licensed any companies to work with cryptocurrencies and expressed specific concerns related to ICOs.

In the same statement on Thursday, the RBI said that it had put together a working group to study the issue of issuing its own digital currency.

"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," the central bank explained, adding:

"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."

Bitcoin and rupees image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Reserve Bank of IndiaRBI