In lieu of protecting consumers and curbing evils like money laundering, the RBI has recently barred all regulated entities, including banks, from dealing in virtual currencies like Bitcoins.
Also, B.P. Kanungo, Deputy Governor, Reserve Bank of India (RBI) added that regulated entities already providing services to any individual or business dealing in digital currencies have also been given three months to exit the relationship. To this, he added that “The RBI has cautioned on at least three occasions members of the public and users of virtual currency regarding risks they are exposing themselves to through these cryptocurrencies. 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 entities dealing with virtual currencies forthwith, and unwind the existing relationship within three months.”
As per the statement published by RBI statement, “virtual currencies, also variously referred to as cryptocurrencies and crypto assets, raise concerns of consumer protection, market integrity, and money laundering, among others. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the RBI shall not deal with or provide services to any individual or business entities dealing with or settling virtual currencies”.
However, this time, noting the benefits that blockchain technology, which underlies cryptocurrencies, can potentially rope in financial inclusions and to increasing financial system efficiency, Kanungo added that the central bank is exploring a “fiat digital currency”.
Kanungo also added that “Several central banks are debating the possibility of introducing a fiat digital currency as opposed to the private digital tokens. These are issued by the central bank, are considered the liability of the central bank”. They will be in circulation in addition to the paper currency and also holds the promise of reducing the cost of printing of notes.”
Kanungo further added that an RBI inter-departmental committee has been formed to prepare a report on the matter, to be submitted by June-end. Regarding the report, he added that “They will explore the feasibility and desirability of issuing a digital currency by the central bank”.
Last December, the Government has already issued a warning on cryptocurrencies, comparing them with the notorious Ponzi schemes floated to dupe gullible investors.
A Finance Ministry statement issued that as virtual currencies were not backed by assets, their prices are entirely a “matter of mere speculation”.
In lieu of this, according to investigation agencies here, with the demand and price of cryptocurrencies on the rise, cybercriminals have found innovative ways to dupe those looking to invest.
To know more, Bitcoins in India have been trading at more than ₹10 lakh each, while people are investing amounts ranging from ₹3,000 to several lakhs of rupees.