In a bid to protect Customers and curb evils like money laundering, the RBI on Thursday barred all regulated entities, Such as banks, from Coping in virtual currencies like Bitcoins, following its earlier Several warnings on their risks.
Regulated entities already providing services to any individual or company dealing in digital monies have been given three months to exit the relationship, Reserve Bank of India (RBI) Deputy Governor B.P. Kanungo told reporters in Mumbai.
“The RBI has cautioned at least three occasions members of the public and users of digital money regarding risks they are exposing themselves to via those cryptocurrencies,” he said.
“We have now decided to fence RBI-regulated entities from the risk of dealing with entities associated with virtual currencies. They are required to stop having a business relationship with things handling virtual currencies forthwith, and unwind the present relationship within three months.”
According to an RBI statement, “virtual currencies, also variously known as cryptocurrencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others”.
“In light of the associated risks, it has been decided that, with immediate effect, entities regulated by the RBI won’t cope with or provide services to any person or business entities dealing with or settling virtual monies,” it said.
Noting, but the advantages that blockchain technologies, which further cryptocurrencies, can potentially cause fiscal inclusion and to increasing financial system efficacy, Kanungo said the central bank is exploring a “fiat digital currency”.
“Many central banks have been debating the possibility of introducing a fiat digital money as opposed to the personal digital tokens. These are issued by the central bank, are regarded as the accountability of the central bank,” he said.
“They’ll be in flow in addition to the paper money and also holds the promise of decreasing the price of printing of notes”
Kanungo said that an RBI inter-departmental committee has been constituted to prepare a report on the matter, to be submitted by June-end.
Last December, the authorities sounded an alarm on cryptocurrencies, comparing them with the infamous ponzi schemes floated to dupe gullible investors.
A Finance Ministry announcement said that as virtual currencies weren’t backed by assets, their rates are a “matter of mere speculation”.
According to investigation agencies here, with the demand and price of cryptocurrencies on the rise, cybercriminals have discovered innovative ways to mislead people looking to invest.
Bitcoins in India have been trading in more than Rs 10 lakh per year, while people are investing amounts which range from Rs 3,000 to many lakhs of rupees.