Today, the Reserve Bank of India has issued a press release, where it states that he forbids immediately that financial institutions regulated by its guidelines do business with others financial institutions that provide crypto related services. This is a major blow to cryptocurrencies in India, and majorly to exchanges that have their accounts in Indian banks.
The public relations statement also affirms that the relations with those entities that offer those kinds of services will be terminated. The part of the article that concerns cryptocurrencies state:
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. A circular in this regard is being issued separately.
India is one of the largest countries in remittances in al the world. And some banks had been experimenting with cryptocurrency remittance system using Ripple, a centralized cryptocurrency. The Reserve Bank of India did not specify what would be of these essays but according to the spirit of the declaration, they will most likely ban these initiatives. This is also a large hit to possible bank earnings due to lending cryptocurrency services to users.
The RBI also declares that they are studying the creation of a central bank digital currency, like the one that China proposed earlier this month. And, despite the ban, it ascertains that technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system. The full press release can be viewed here.