The Reserve Bank of India has made it illegal for banks and other financial institutions in the country which come under its oversight to provide services to individuals/companies dealing with cryptocurrencies.
The new development was announced via a statement released this Thursday:
“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 [cryptocurrencies].”
The statement went on to add that all financial institutions which are currently providing cryptocurrency services will be required to end these relationships within a specified time. RBI deputy governor BP Kanungo clarified during a press conference later that the time limit will be three months.
The move comes at a time when regulators worldwide are beginning to tighten their grip on cryptocurrencies – a development which has sent the crypto market into a bearish tailspin from which it has yet to recover.
In addition, the Indian authorities’ stance on crypto has been far from welcoming. Recently, Indian finance minister Arun Jaitley reiterated the government’s view that cryptocurrencies are not legal tender, adding that the authorities will “take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system”.
More recently, India’s former economic affairs secretary stated that cryptocurrencies are too challenging to regulate and should be banned altogether.
India has yet to set forth a clearly defined policy on cryptocurrencies, and as yet there is no definite ban on Bitcoin and its peers, although the regulatory climate is far from welcoming. A crackdown by tax authorities, which began in December last year, resulted in approximately 100,000 crypto investors being served tax notices.
In addition, the increased regulatory pressure and lack of clarity regarding the status of cryptocurrencies in the country have put crypto exchanges on high alert, with two exchanges having halted operations last month.