Reserve Bank of India restricts bank transfers for bitcoin exchanges

This past week, the Reserve Bank Of India (RBI) declared new policies concerning the operation of Indian bitcoin and cryptocurrency exchanges. The news came when the RBI announced its bi-monthly monetary policy for the fiscal year 2018-19.

They announced then that all the banks and financial institutions regulated by them shall not provide any service to individuals or organizations dealing in trading of cryptocurrencies such as Bitcoin, Ethereum, etc. With an immediate effect, Indian crypto traders were barred from withdrawing fiat money from the exchanges to their respective banks.

Also, according to Abizer Diwanji, Head, Financial Services, EY India, “A person will not be able to transfer money from his savings account to his crypto wallet.”

As soon as the news broke out, the price of Bitcoin on the Indian crypto exchange, Zebpay, came down from $6989 to $5299 within 3 hours whereas the global average price of bitcoin in the overall market wobbled around $6,680.

It can be interpreted that the fall in price was the FUD created by this news and the way media presented it. However, one should note that India still hasn’t banned cryptocurrencies. RBI is a banking regulatory body that only controls the monetary policies of India. It’s not a legislative body. The only institution in India that can actually ban cryptocurrencies is either the Government of India or the Supreme Court of India. One can also include the State Government and State High Court as well.

See below the declaration made by the RBI:

“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.”

First things first, the decision/statement was more in line with an earlier statement on the risk associated with the investment in cryptocurrency dated back on February 7th, 2018. Secondly, nowhere in the announcement was it mentioned the date or time of an immediate ban. RBI hasn’t defined the time by which the banks and other financial institution are to stop offering their services to cryptocurrency exchanges.

The CEO, Co-founder of Indian exchange UNOCOIN Mr. Sarthak V, issued a public statement where he clearly mentioned that as of today, no banks that they are working with have issued any notice to them. Even the bank managers have said that no further instructions about the timeline to stop offering services to their crypto-exchange clients have been given to them by the RBI.

The Government of India also has not issued any notice regarding the timeline and deadline for such bans. On top of that, The Supreme Court of India has asked for a response from the Government of India regarding the regulation of cryptocurrencies. So, for now, we can say that articles with titles such as ‘India Bans Cryptocurrencies’ shouldn’t be considered with a serious mind.