Effectively, RBI has banned Bitcoin and other cryptocurrencies.
It has barred all financial institutions from dealing in Bitcoin and other cryptocurrencies. Which means, no person will be able to transfer money from their bank account to crypto wallets and vice versa.
“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 (virtual currencies),” the RBI said in a statement.
Bitcoin Investors Given 3 Month Window
RBI has said that it had given a period of 3 months to service providers to unwind their existing relationships.
Deputy Governor of RBI BP Kanungo said the RBI had decided to ring-fence RBI regulated entities from the risk of dealing in cryptocurrencies.
RBI has made clear that it had not given license to any organization dealing in cryptocurrencies.
RBI has routinely been giving warnings about the risks involved in cryptocurrency investment.
On the 1st of February 2018, the Finance Minister, Arun Jaitley had called cryptocurrencies ‘not legal tender’ during his speech announcing the Budget for 2018-19.
The Deputy Governor of RBI also added, “We also recognize that the Blockchain technology or the distributed ledger technology that lies beneath the virtual currencies has potential benefits for financial inclusion and enhancing the efficiency of the financial system and we also believe that they should be encouraged to exploit beneficially for the economy.”
At the same time, rumors are also afloat of the Government launching its own cryptocurrency by the name of ‘Lakshmi Coin’.
The legality of Bitcoin and other cryptocurrencies in India has long been in the grey zone in India.
Earlier, there the Income Tax Department of India had collected data of crypto investors in India from various exchanges.
The tax department had also at one point made clear that investors would have to pay tax on gains made from cryptocurrency investments.
At the time of writing this, the price of Bitcoin in INR is around Rs Rs 4,25,000 per Bitcoin while the cost of Bitcoin globally is $6,609 or around Rs 4,29,000.