The RBI Circular On Banking Restriction On Cryptocurrencies. Will Come In Effect From July 5; Banks Will Stop Their Services To All Cryptocurrency Entities
In a breaking development, the Supreme Court (SC) of India has refused to grant a temporary stay on the RBI’s banking restriction on cryptocurrencies.
After the SC had earlier ordered that all cryptocurrency-related cases be clubbed together and fixed July 20, 2018 as the date for the next hearing, the Internet and Mobile Association of India (IAMAI) had requested that the hearing be brought forward as the RBI’s circular dated April 6 is set to come into effect from July 5.
Accepting the request, the SC had fixed the hearing for today (July 3). According to reports, the Supreme Court has refused to grant any relief to cryptocurrency entities. Banks will now have to stop extending their banking solutions to all cryptocurrency-related entities.
Commenting on the development, Ashish Singhal, Co-founder & CEO of CoinSwitch.Co said, “Once the deadline is over, exchanges will only be able to support crypto-to-crypto pairs. Thus, individuals who wish to buy cryptos with other cryptos would still be able to do that and be part of this global phenomenon. However, INR to crypto conversions would become challenging, as exchanges won’t be supporting the same, post the deadline.”
He further added, “Users will have to either approach a local OTC market or use service of P2P exchanges, where the exchange would act as an escrow for the crypto transfer and the buyer send the INR directly to the seller. Once the payment is confirmed, the P2P exchange will transfer the crypto to the buyer. Exchanges across India wants the RBI to re-evaluate their decision and work towards stringent regulation instead of a blanket ban on the banks. The exchanges have always adhered to strict KYC and AML procedures and hope that the RBI softens its stance in this matter.”
Not only banks, the RBI circular will be equally applicable to digital payments providers as well, which are also regulated by the RBI.
On April 6, the RBI had issued a circular to all RBI-regulated organisations such as banks and prepaid payment instruments (PPIs) banning them from dealing with or providing any services to entities that deal with any cryptocurrencies such as Bitcoin. The RBI had given a three-month window to these organisations to take the necessary steps.
Leading cryptocurrency exchange Zebpay has already issued a notification to its users, saying that the rupee-to-cryptocurrency conversion facility might end abruptly, citing the RBI circular. Zebpay told its users that they’re free to withdraw their money as long as the exchange facility is available.
Meanwhile, Zebpay and other exchanges like WazirX have already started offering crypto-to-crypto exchange facilities.
Nischal Shetty, Founder & CEO of WazirX said, “If you look at the global picture, countries such as the US, Japan, South Korea, EU, Malta, Estonia, Thailand etc. are regulating cryptocurrencies in their country. So it’s obvious India will do the same. It’s just a matter of time. As and when India announces crypto regulations, there will be a 1000% increase in the number of crypto traders and this segment will see a great boom in the country.”
Requesting the RBI to relook their decision, Nishchal added, “India needs to be ahead in the crytpo race as it will help the country to be a top fintech player of the future. RBI has a large role to play and I hope they consider this opportunity.”
The SBI has already notified its customers that it has discontinued cryptocurrency dealings through SBI cards. It is worth noting that leading Indian banks including HDFC, AXIS, YES, ICICI, and Kotak Mahindra have also stopped many of their services to cryptocurrency exchanges, other entities, and traders.
Worldwide, a number of banks including Lloyds, Capital One, Bank Of America, Citibank and JP Morgan have already barred their customers from purchasing Bitcoin and other cryptocurrencies with their cards.
