Reserve Bank of India Cracks Down on Digital Currencies, Calls For Regulated Entities to Cut Ties

India and its Reserve Bank, have played their hand when it comes to regulation of Bitcoin and other cryptocurrencies in the country. During the first monetary policy committee (MPC) review meet the RBI stated that any entities regulated by RBI should no longer deal with virtual currencies.

This points towards stern regulation if the virtual currencies in the country as the government and its regulators look to cut ties with things like Bitcoin instead of trying to integrate them into the system.

With immediate effect

In a statement from the RBI, it was made plain and obvious that the state-bank did not want to have to deal with any entity that was flirting with virtual currencies, and thus, any entity wishing to stay within regulation need cut ties.

“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,” the RBI statement said.

The RBI has given any entities currently involved with cryptocurrencies three months to tie up their business and essentially stay in the regulator’s good books

“Internationally, while the regulatory response to these tokens is not uniform, it is universally felt that they can seriously undermine the AML (anti-money laundering) and FATF (Financial Action Task Force) framework, adversely impact market integrity and capital control,” RBI Deputy Governor BP Kanungo explained.

Big effect in India

There have already been a few businesses in India that have made decisions before this statement to end their cryptocurrency business. Exchanges, BTCXIndia and ETHEXIndia, two very small exchanges in the country, closed their doors in early March citing regulatory fears.

The news was not taken well by those who hoped to continue in the business of cryptocurrencies

I don’t believe this is the right direction that the central bank has taken. This will cause panic among a few million people in India who are already using cryptocurrencies,” said Sathvik Vishwanath, co-founder of Unocoin, a virtual currency exchange in the country.