India’s Cryptocurrency Ban Carries Concerns For Central Bank Bitcoin Outlawing

India Central Bank Cracking Down On Crypto Concerns

The Reserve Bank of India (RBI) is concerned about its treatment of cryptocurrencies. In an annual report released on August 29, the bank stated

“Developments on this front need to be monitored as some trading may shift from exchanges to peer-to-peer mode, which may also involve increased usage of cash.

Possibilities of migration of crypto exchange houses to dark pools/cash and to offshore locations, thus raising concerns on [anti-money laundering/combating the financing of terrorism] and taxation issues, require close watch.”

A few months beforehand, the regulator ordered that all elnders close their cryptocurrency exchange accounts and that traders wind down their cryptocurrency business relationships. Since doing so, peer-to-peer trade has boomed in an attempt to circumvent the bank. Such a trading mechanism connects the buyer and the seller, whereas in crypto-to-crypto transactions, traders are able to purchase units of one digital currency for another at a predetermined rate.

Another mode of getting around the bank is moving offices to more crypto-friendly countries. Many of the exchanges also state that Reserve Bank of India could have avoided the situation by adopting more prudent steps to understand the ecosystem and regulate it, rather than trying to heavily regulate it. According to Praveen Kumar, CEO of Belfrics,

“[t]he exchanges have been following a robust know-your-customer procedure and enforcing only bank-related transfers which could have helped to keep a tab on the money trail.”

At this point, the bank is still uneasy about cryptocurrencies. The bank believes that regulation will protect customers. At a report stated,

“[t]hough cryptocurrency may not currently pose systemic risk, its increasing popularity leading to price bubbles raises serious concerns for consumer and investor protection, and market integrity.”

Interestingly enough, the Reserve Bank of India’s decisions have been challenged in court and are currently on appeal at the country’s supreme court, which is scheduled to hear the case on September 11, 2018.