Reserve Bank today directed all regulated entities including banks not to provide services to businesses dealing in virtual currencies like bitcoins, so as to protect consumer interest and check money laundering. Technological innovations, including virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system, RBI said after its first bi-monthly monetary policy review of 2018-19.
"However, virtual currencies (VCs), also variously referred to as cryptocurrencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others," it said. RBI said it has repeatedly cautioned users, holders and traders of VCs, including bitcoins, regarding various risks associated in dealing with such virtual currencies.
"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 VCs," RBI said in a bid to ring-fence such entities.
The central bank further asked entities, which are already into such services to stop providing these services within a specified time. RBI said it will also issue a circular separately on this matter.
May Launch Virtual Currency
RBI is not completely giving up on cryptocurrency. Just like many central banks around the world, RBI too is studying the feasibility of launching a fiat digital currency. "These are issued by the central bank and are considered the liability of the central bank...They will be in circulation in addition to the paper currency that we have. It also holds the promise of reducing the cost of printing notes." said RBI Deputy Governor BP Kanungo at a media conference.
An inter-departmental group constituted by the RBI will study the feasibility of this fiat currency and submit a report on the same by June-end.
Inputs from PTI and Bloomberg