Reserve Bank of India (RBI) has announced a major crackdown on cryptocurrencies, even as it unveiled plans to create its own digital currency. The value of Bitcoin in India fell from Rs 4,60,000 to Rs 3,50,000 instantly after the announcement. In its first policy for FY19, the RBI said banks and other regulated entities cannot provide services to users, holders, and traders of cryptocurrencies. Also, the apex bank said a panel would submit a report by June on the desirability and feasibility of introducing a virtual currency backed by the government.
While the RBI is looking at digital currencies for cutting costs of paper and making transactions more efficient, the system would be in addition to paper currency and will not entirely replace banknotes. The notification has, needless to say, triggered panic-selling among Bitcoin traders. Crypto-trading platforms like Unocoin and CoinSecure are trying to pacify traders on the platform. “There has been panic-selling to some extent, so the situation is bad. We are talking to investors but nothing concrete has been decided yet,” said Unocoin co-founder and CEO Sathvik Vishwanath.
RBI deputy governor BP Kanungo said, “Digital tokens issued by private parties have been getting international attention for quite some time because of the speculative value. While the regulatory responses are not uniform, it is universally felt that they (cryptocurrencies) could seriously undermine the anti-money laundering and financial action task force framework, adversely impact market integrity and capital controls and, if they grow, they can endanger financial stability. Co-founder of Nuo- a blockchain-powered bank for cryptocurrencies, Varun Deshpande said in the future, no bank or exchange in India can provide a way to convert Bitcoins into 'fiat' or vice versa. “Still, holding your Bitcoins or trading them isn't illegal in any way whatsoever,” he said.
He said cryptocurrencies in future will have sufficient depth even if they cannot be converted into rupees. “We believe that this is a huge misstep which needs serious reconsideration. But this couldn't stop crypto believers from holding their crypto currencies since, going forward, it would enable access to global services and resources irrespective of whether you can liquidate them into fiat.”