After hitting a peak in January this year, Bitcoin price has plunged to nearly a one-third of the peak value, and the altcoins are not holding much better either. The entire cryptocurrency ecosystem seems to be undergoing a metamorphosis with regulations creeping in and Governments creating FUD (Fear, Uncertainty and Doubt) every now and then. The Indian Finance minister had earlier declared that the cryptocurrency is not a legal tender. However, starting now, the RBI has banned regulated financial institutions from legally dealing with cryptocurrency.
“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 [virtual currencies],” This is what the bank had to say.
The RBI has further directed the companies that are already providing service to cryptocurrencies to end the relationship within the next three months. The announcement of the exact deadline will be made shortly. Cryptocurrencies have been under the scanner of governments and regulatory authority since last year. The Bitcoin price peaked at $20,000 in December and this the authorities swooped into action.
Since Bitcoins, or as a matter of fact, most of the cryptocurrencies are not backed by any government; the authorities seem to be hell-bent on declaring a cease and desist order on cryptocurrency trade. That being said, the trade in cryptocurrency is inherently risky since the market is still in its infancy. Government authorities have also been concerned about consumer protection, market integrity, and money laundering.
In fact, the Indian government has gone as far as issuing a statement that reads out as follows, “(Government will) take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system.” Earlier on the tax department had sent notices to thousands of cryptocurrency users.
This move is expected to affect Indian crypto exchanges like Koinex, ZebPay, and Unocoin since users will neither be able to invest money nor will they be able to liquidate their funds into fiat. Last month, HDFC, a private sector lender had sent an email to all of its users that it would be banning the use of Credit, Debit, and Netbanking for buying cryptocurrencies.