Regulated entities already providing services to any individual or business dealing in electronic monies are given three weeks to leave the relationship, Reserve Bank of India (RBI) Deputy Governor B.P. Kanungo told reporters in Mumbai.
“The RBI has cautioned at least three occasions members of the public and users of virtual money regarding risks they’re exposing themselves to via those cryptocurrencies,” he said.
“We have now decided to fence RBI-regulated entities from the probability of dealing with entities connected with virtual currencies. They must stop having a business relationship with entities handling virtual monies forthwith, and unwind the existing relationship within three months.”
Based on an RBI announcement, “virtual currencies, also variously known as cryptocurrencies and crypto assets, increase worries of consumer protection, market integrity and money laundering, among others”.
“In view of the related risks, it has been determined that, with immediate effect, entities governed by the RBI shall not deal with or provide services to any person or business entities dealing with or settling virtual currencies,” it stated.
Noting, however, the advantages that blockchain technologies, which underlies cryptocurrencies, can potentially cause fiscal inclusion and to raising financial system efficacy, Kanungo said the central bank is researching a “fiat digital money”.
“Several central banks have been debating the prospect of introducing a fiat digital currency instead of the private digital tokens. These are issued by the central bank, are regarded as the accountability of the central bank,” he said.
“They will be in circulation in addition to the paper money and also holds the promise of decreasing the price of printing of notes.”
Kanungo said an RBI inter-departmental committee was constituted to prepare a study on the topic, to be filed by June-end.
Last December, the authorities appeared an alert on cryptocurrencies, comparing them with the notorious ponzi schemes floated to dupe gullible investors.
A Finance Ministry announcement said the virtual monies were not backed by assets, their prices are entirely a “thing of mere speculation”.
According to research agencies here, with the demand and cost of cryptocurrencies on the upswing, cybercriminals have discovered innovative ways to dupe those looking to invest.
Bitcoins in India are trading at more than Rs 10 lakh each, while individuals are investing amounts ranging from Rs 3,000 to many lakhs of rupees.