RBI Considers Central Bank Digital Currency But Bans Regulated Entities from Dealing in Cryptocurrencies

Rebecca Campbell | April 5, 2018 | 5:29 pm

RBI Considers Central Bank Digital Currency But Bans Regulated Entities from Dealing in Cryptocurrencies

Rebecca Campbell | April 5, 2018 | 5:29 pm

India’s central bank is reportedly considering the introduction of a ‘central bank digital currency’ as it bans regulated entities such as banks from dealing in cryptocurrencies with individuals or businesses.

In a statement released today, BP Kanungo, the Deputy Governor for the Reserve Bank of India (RBI), said at a media conference that evolving changes within the payments industry has meant that central banks are now exploring the idea of implementing ‘fiat digital currencies,’ adding:

While many central banks are still engaged in the debate, an interdepartmental group has been constituted by the Reserve Bank to study and provide guidance on the desirability and feasibility to introduce a central bank digital currency. The report will be submitted by end-June 2018.

News of RBI’s consideration of a central bank digital currency comes as Kanungo also announced that the bank had directed regulated entities to cease their operations with companies and individuals related to digital currencies. Such a move means it’s no longer possible for people to purchase cryptocurrency through their banks or e-wallets through an organisation that is regulated by the central bank.

“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 [virtual currencies.] Regulated entities which already provide such services shall exit the relationship within a specified time,” Kanungo added.

India’s central bank has repeatedly issued warnings to the public – one in 2013, followed by a second in 2017 – regarding the use of digital currencies and the risks that come with them. However, while it has cautioned users against the use of cryptocurrencies, remaining wary of them, its announcement regarding the introduction of a central bank digital currency shows that it’s not yet ready to give up on the notion of a digital currency.

The RBI joins a growing list of global central banks that are considering their own plans to create a digital currency token or have already done so. Even though China has taken a firm stand against cryptocurrencies, banning ICOs and the operation of crypto exchanges in the country last September, it is reportedly developing its own sovereign cryptocurrency. However, last month it was reported that The Republic of the Marshall Islands had become the first sovereign nation to issue a cryptocurrency that will be legal tender alongside that of the US dollar.

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  • Jim Kelly

    The end for cryptos is nigh at hand. No bank wants it. No country backs it. The bubble continues to deflate on bitcoin.

  • Richard Pain

    Most countries officially recognizes bitcoin and digital currencies as a “means of payment that is not a legal currency”. Cryptos and blockchain technology are evolving as a parallel ecosystem providing significant commercial value. Certain blockchain technologies will displace current financial business models.

    Circle Ltd. recently acquired U.S.-based crypto-currency exchange Poloniex for $400 million. Circle fosters liquidity between fiat currencies and crypto-currencies. Circle manages over $2 billion a month in transactions similar to Paypal. It is backed by Goldman Sachs, IDG Capital Partners and Breyer Capital. Wallstreet is investing in crypto technology.

    The Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) created Bitcoin futures contracts in December 2017. Bitcoin futures trading is also available at TD Ameritrade. The NASDAQ plans to introduce Bitcoin futures in Q2 2018.

    Finally, Bitcoin ETFs exist today for cryptocurrency investors. As well, the Securities and Exchange Commission (SEC) has received over 200 applications for Bitcoin and Crypto related ETFs from the NYSE, NASDAQ, and various Hedge Funds. This market will continue to grow as adoption and measured regulation increase over time.

    Do not believe the FUD (fear, uncertainty, doubt). FUD is a distraction while the bigboys/whales are positioning their businesses to control the crypto sphere.

  • Jim Kelly

    Bitcoin has already lost 70% of its value. The whales will exit their positions on any rally and the price will continue to drop. Bitcoin is now a sucker’s bet. The day futures trading was initiated was the day of the top. It has been all downhill since. Those who continue to cling to hope will lose their entire investment.

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