India bans Bitcoin by blocking banks from processing cryptocurrency purchases
The Indian Central Bank introduces sweeping new policies as India bans Bitcoin and other cryptocurrencies.
Residents in India have now been blocked from investing in cryptocurrency.
The government has introduced new regulations that prevent banks from processing transactions for digital assets purchases of any kind.
Although the country hasn’t made it illegal to own crypto, per se, India bans Bitcoin and digital currency by making it impossible to buy with fiat.
How India bans Bitcoin
The Reserve Bank of India (RBI) announced the sweeping new policy on Thursday.
The new regulation forbids RBI-regulated institutions from allowing their customers to purchase cryptocurrencies.
It also prohibits banks from providing services to businesses “dealing with or settling [virtual currencies].”
From the official statement by the RBI:
“Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, 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.
“Regulated entities which already provide such services shall exit the relationship within a specified time.”
Essentially, India bans Bitcoin and cryptocurrency traders from depositing or withdrawing fiat currency at crypto exchanges.
The ban will force them to use P2P (peer-to-peer) trading platforms such as LocalBitcoins.
LocalBitcoins transactions denominated in INR currently account for around $1 million in weekly volume, according to data from CoinDance.
The statement by the Indian Central Bank does acknowledge blockchain technology’s potential, however.
The RBI believes it has many potentially-beneficial applications but argues that cryptocurrencies raise a number of concerns.
The unease it cites relates to consumer protection, preventing financial crimes, and market integrity, saying:
“Technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system.
“However, Virtual Currencies (VCs), also variously referred to as crypto currencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others.”
According to a report by CCN, India-based cryptocurrency trading volume had already plummeted by 90 percent in recent months.
The banks have already begun restricting the ability of cryptocurrency exchanges to secure access to financial services and locals to trade with funds stored in Indian bank accounts.
Until now, however, this blockade had not been codified into official government policy.