RBI has reportedly asked banks to discontinue all banking services to crypto-related businesses. This is a strong action after finance minister Arun Jaitley had said that the government does not consider cryptocurrencies as legal tender in India.
The RBI is also concerned that the absence of a regulatory framework for cryptocurrencies might expose the banking system to risks arising from crypto assets, including frauds and hacking. It further said that some “cryptoassets” have features of securities and therefore their trading is already being regulated by SEBI. The income-tax law, it added, provides for taxing any transactions in virtual currencies under the head “income from other sources” which accords with internationally accepted taxation principles.
Following a similar action by State Bank of India, ICICI Bank, India’s largest private sector lender by assets, has put on temporary hold cryptocurrency-related transactions until it gets more clarity on how to deal with them.
RBI is said to have mentioned that cryptocurrency could pose a threat to the country’s national security and “the perception of investors, including retail consumers, on the safety and soundness of virtual currencies will change”. It is also reported that RBI raised concerns about money laundering risks, and will not offer banking facilities to crypto transactions. RBI is also said to be urging all banks to increase their vigilance on data related crimes and frauds, banks such as ICICI Bank, and IndusInd banks are also cutting down their exposure to crypto trades.
A virtual conference of cryptocurrency entrepreneurs and professionals under the banner of Blockchain and Crypto Assets Council (BACC) on Friday (April 14, 2021) called ‘We The People’ is aiming to bring a change in the way digital assets are regulated in India.
Whereas some were of the view that India should take a cue from Singapore and create appropriate regulatory frameworks for technical novelties such as cryptocurrencies and other blockchain technology-based products.
The Singapore government has amended the Payment Services Act to cover cryptocurrency trade, and signed a memorandum of understanding with authorities in Japan’s southern region of Suwa for greater cooperation on fintech and cybersecurity. This could be one of the major reasons behind RBI’s proposed ban on crypto activity.
Mr. Shetty the one of the major characters of Cryptocurrencies in India, has said at the BACC conference in New Delhi;. “It is a very positive climate to be in the crypto sector in India right now, he added. RBI’s repeated warnings against the risk associated with cryptocurrencies doesn’t bother us – it is actually pushing Fintech entrepreneurs in a positive direction, we want to show people that India is open for blockchain and crypto but if the ban stays then we will look elsewhere for expansion. It’s not about how much money raised, but how many new users crypto has brought into this space; we have been able to bring over 1 million new users into the industry.’”
