Reserve Bank of India bans banks in India from dealing with crypto-currency

Reserve Bank of India today directed all regulated entities including banks not to provide services to businesses dealing in virtual currencies like bitcoins, so as to protect consumer interest and check money laundering.

Technological innovations, including virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system, RBI said after its first bi-monthly monetary policy review of 2018-19.

“However, virtual currencies (VCs), also variously referred to as crypto currencies and crypto assets, raise concerns of consumer protection, market integrity, and money laundering, among others,” it said.

RBI said it has repeatedly cautioned users, holders, and traders of VCs, including bitcoins, regarding various risks associated in dealing with such virtual currencies.

“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,” RBI said in a bid to ring-fence such entities.

The central bank further asked entities, which are already into such services to stop providing these kinds of services within a specified time.

RBI has recently issued a press release:

 Ring-fencing regulated entities from virtual currencies

Technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system. However, Virtual Currencies (VCs), also variously referred to as crypto currencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others.

Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. 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. A circular in this regard is being issued separately.

This article was originally written on Business Standard.

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