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Central bank bans many cryptocurrency transactions
The Indian central bank has banned all regulated entities from dealing with Bitcoin.
In its bimonthly monetary policy statement released today, the Reserve Bank of India (RBI) said that the financial agencies and banks it regulates will not “deal with or provide services to any individual or business entity that deals in or establishes VC (virtual currencies).” “Regulated entities already providing such services must exit the relationship within a specified time,” the policy declaredThe bank cited concerns about consumer protection, market integrity and money laundry as reasons for his decision.
The measure could significantly reduce cryptocurrency trading in the country as this means that Indians will not be able to transfer funds from their bank account to cryptocurrencies e-wallets for purchase or sale transactions. But the bank has not completely washed its hands of digital currencies. It said that virtual currencies have “the potential to improve the efficiency and inclusiveness of the financial system.”
Regulatory warnings
The legal status of cryptocurrencies is unclear in India. They are not banned, but regulators have repeatedly warned users and traders about their risks and distanced themselves from transactions involving the financial instruments. For example, the RBI clarified that “no regulatory approval, registration or authorization has been obtained by the concerned entities to carry out such activities” in a December 2013 circular. (See also: RBI issues warning on cryptocurrencies)
During his budget speech earlier this year, Indian Finance Minister Arun Jaitley said that cryptocurrencies were not legal tender and that the government would do everything possible to eliminate their use in “financing illegitimate payment systems or as part of the payment system.” The government’s income tax division also issued notices to individuals in January this year after a survey has shown that in the last year, $3.5 billion worth of cryptocurrency transactions were made.
India is home to about 1% of bitcoin miners. While cryptocurrency trading volumes on exchanges are nowhere near their counterparts in China or South Korea, they have seen stratospheric growth over the past year due to the growing media buzz about cryptocurrencies. Zebpay, India’s largest cryptocurrency exchange, said it added 200,000 users per day in January.
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