RBI’s Concern Over Crypto-Lockdown Backfiring

RBI, in a report released on 29^th August, stated that a check is needed to be kept on the trade of virtual currencies. According to RBI, it is worried that it is pushing the virtual currency in the dark.

Since the declaration of the ban imposed by the RBI, many monetary institutions have tweaked to minimize the use of bank accounts and resorted to cryptocurrencies to circumvent the ban. Some exchanges have also resorted to moving their head offices from India to other cryptocurrency favoring countries. They have migrated to peer-to-peer trade and crypto-to-crypto transactions. In this the exchanges can directly connect the buyer and seller as well as enable buying, selling and transfer of cryptocurrencies for other cryptocurrencies.

According to the statement of RBI, the increased usage of cryptocurrencies demands a trail check to keep frauds like AML and CFT (anti-money laundering/combating the financing of terrorism). The uneasiness of RBI in regards to cryptocurrency is quite well known, backed by the reason that digital currencies are not backed by any real assets. Hence they pose a very real risk to the economy, investor’s protection, and market integrity. For instance, Bitcoin lost $200 Billion just after 2 months of touching a peak in December.

On the other hand, exchanges argue that RBI should have invested in understanding the technology behind the currency and the ecosystem rather than just banning it. For now, all is set for the judgment of the Supreme Court which is to be declared on September 11^th.

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