Simultaneously, it said a panel would submit a report by June on the desirability and feasibility of introduci... Read More

Mumbai/Delhi: The Reserve Bank of India (RBI) on Thursday announced a major crackdown on cryptocurrencies even as it unveiled plans to create its own digital currency. Following the announcement, the value of Bitcoin in India fell from Rs 4.6 lakh to Rs 3.5 lakh. In its first policy for FY19, the RBI said banks and other regulated entities cannot provide services to users, holders and traders of cryptocurrencies.

Simultaneously, it 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 RBI’s notification 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 & CEO Sathvik Vishwanath.

RBI deputy governor B P Kanungo said, “Digital tokens issued by private parties have been getting international attention for quite some time because of their 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.”

Varun Deshpande, co-founder of Nuo — a blockchain-powered bank for cryptocurrencies — said in future, no bank or exchange in India can provide a way to convert Bitcoins into ‘fiat’ (rupees) or vice versa. “Still, holding your Bitcoins or trading them isn’t illegal in any way whatsoever,” he said.He believes that cryptocurrencies in future will have sufficient depth even if they cannot be converted into rupees. “We believe that this (RBI action) is a huge misstep which needs serious reconsideration. But this wouldn’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,” he said. Some investors are trying to either redeem their crypto coins or transferring them to international wallets that still allow trading.

However, some see the price drop as an opportunity to buy. Dhiren Dhuku, a crypto enthusiast and investor, said, “Banks were never supposed to be part of cryptocurrencies anyway. They started as a system that was free of bank control. So I see a silver lining in this.” RBI’s Kanungo also said that while the RBI was ring-fencing banks from cryptocurrency risks, it was mindful of the advantages of blockchain — the ‘public ledger’ technology behind cryptocurrencies. “We also recognise that the blockchain technology has potential benefits for financial sector and we believe that they should be encouraged to be exploited for the benefit of the economy,” said Kanungo.

