Category Archives: Reserve Bank of India

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Indian Government Given Two Weeks to Clarify Official Cryptocurrency Stance

The Indian government has two weeks to produce a finalized version of cryptocurrency policies, declares the country’s supreme court.

In April this year, India’s central bank, the Reserve Bank of India (RBI) enforced a ban. This prohibited financial institutions from facilitating any crypto-related transactions or offering their services to any business in the industry. This controversial imposition sparked outrage from the local cryptocurrency community, with the supreme court finally hearing their case this week following months of petitions.

Currently, there are no official state-issued policies banning cryptocurrency. However, Nakul Dewan, a counsel for nine crypto exchanges opposing RBI’s ban, said that the RBI has stopped nearly all Bitcoin transaction taking place in India. Evidently, this unclear legal situation has discouraged traders.

Speaking at the court hearing Thursday, Dewan said that with employees and jobs on the line, the government needed to set out a clear policy stance. Thereby, ending the uncertainty caused by RBI’s decision in April.

RBI counsel Shyam Divan defended the bank’s position, saying that it merely has attempted to discourage the use of cryptocurrencies, while the real power for prohibiting them remains with the government. After hearing both cases, the Supreme Court justices told the government it had two weeks to clarify its policy stance.

Responding to the hearing, a team of blockchain-related lawyers working under the platform name Crypto Kanoon posted on Twitter: ”Counsel for Union of India apprised that Committee is going to come up with a report on crypto. Court has directed the Govt. to file Counter Affidavit within 2 weeks.”

Crypto Matter heard today in Court no. 8 as item no. 19.

Counsel for Union of India apprised that Committee is going to come up with a report on Crypto.

Court has directed the Govt. to file Counter Affidavit within 2 weeks.

Matter to be listed after 2 weeks now. #RBI

— Crypto Kanoon (@cryptokanoon) October 25, 2018

The original petition following RBIs decision has over 44,000 signatures to date with a goal of reaching 50,000, calling for the government to reverse the ban.
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First Bitcoin ATM Appears in India Despite Central Bank Crackdown

Despite the central bank’s crackdown on cryptocurrencies including Bitcoin in India, the country’s first Bitcoin ATM has been established in Bengaluru’s Kemp Fort Mall.

The ATM is for the exclusive use of local crypto exchange Unocoin’s clients, allowing users to deposit cash or withdraw money for future use on Unocoin’s website or smart device application.

The machines offer a way of circumventing the Reserve Bank of India’s (RBI) cryptocurrency crackdown, as Unocoin say they do not involve the country’s banking system in any way, hence do not fall under the jurisdiction of the central bank. While Unocoin accepts that standard Bitcoin ATM’s would be banned in the country under RBI guidelines, it believes that because they do not offer banking services technically speaking, its ATMs are exempt.

Some of the harsh restrictions that RBI has established include a prohibition of business relationships between lenders and digital currency exchanges and traders, leading to a decline in trading volumes, local cryptocurrency businesses suffering financially, and a general backlash from the whole, suffering industry in India.

Differing slightly from Bitcoin ATMs seen outside the country, Unocoin hopes to fill the vacuum left by banks retreating from offering crypto businesses and investors financial services. With each user given unique access keys to their account, they cannot purchase assets directly from the machine but need to access the website or app to complete the transaction. Its predominant use is to allow users to deposit their cash for later use on the site.

Right now, the machine can accept cash deposits between INR 1,000 and INR 10,000.

Two more ATMs from Unocoin are scheduled for launch in Mumbai and New Delhi later this week, adding to an overall estimated total of 3,879 cryptocurrency ATMs operating in 76 countries.

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Reserve Bank of India Says Bitcoin Is Not A Currency, Couldn’t Be More Wrong

The Reserve Bank of India (RBI) has declared that Bitcoin is not a currency in an affidavit to the Indian Supreme Court, during an ongoing legal battle regarding the ban on banks from facilitating any crypto-related activity in India. The Reserve Bank of India is completely wrong.

Specifically, the affidavit says “It is submitted that crypto-currencies fall short of being true currencies. It is further submitted that RBI does not consider virtual currencies such as Bitcoins as ‘currency’ under the extant laws. There are no enabling provisions under the extant law to treat Bitcoin as currency”. The RBI further argues that Bitcoin can’t be a currency because it has no physical form, and aren’t issued by the RBI.

The RBI could not be more wrong. Bitcoin has an excellent track record as a currency, it can be used to buy or sell anything in the world, and transactions sent with Bitcoin are instant and cryptographically secure. Combined with very low fees to send Bitcoin transactions, Bitcoin is actually better than fiat for international finance due to its speed and security. Bitcoin has 99.9% uptime and success when sending transactions, and is very reliable when used as a currency.

The RBI has led a month-long battle to stomp out Bitcoin and crypto in India, and they have succeeded at getting banks to stop offering accounts to crypto exchanges and traders. However, since Bitcoin itself is still legal in India, peer to peer Bitcoin dealing has proliferated across the country. It would probably be best for India to classify and regulate Bitcoin, like most other countries, instead of driving it underground where they have no control over it at all.

In reality, the RBI likely feels threatened by Bitcoin, since it is the first decentralized currency to spread across India, and is rapidly gaining value and use. This is unlike the Indian Rupee (INR), which has been experiencing massive inflation rates. The exchange rate has gone from INR 63 per USD to INR 72 per USD so far during 2018, yielding an annual inflation rate of 19% per year.

This inflation rate is approaching the hyper-inflation threshold, and as seen in other nations like Venezuela and Zimbabwe, once inflation begins increasing to double digits it usually continues to accelerate until ultimately a currency collapse occurs. Right now, the RBI’s biggest problem is the threat of a currency collapse, and they likely think capital outflows into the Bitcoin market will worsen the situation, which is why they are trying to make it illegal.

The collapse of fiat currencies like the INR may be inevitable, and it would be much better for India if Bitcoin stays legal so the country can adopt it over time, so the Indian financial system will still be functional in the event of a fiat collapse.

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P2P Becoming the Indian Way to Trade Crypto Following the Banking Ban

Peer to Peer (P2P) trading is on the march in India due to the country’s banks shutting down crypto services this year.

Since the Reserve Bank of India (RBI) decision earlier this year, Indian traders are adapting as only Indians can do, and are doing it with great success too, with homemade P2P platforms and exchange adaptations using P2P trading.

Peer-to-Peer trading cuts out the banks completely. Out of this move, a new service KoinLoop has launched such a service, born out of two collaborating exchanges; KoinEX and WazirX. The latter’s CEO argues that his company also has the cheapest BTC price in India, adding:

“If banking is something the exchanges are not allowed to do, then the solution is something that direct banking doesn’t come in.”

As Bitcoin News reported recently Dabba is also taking off as a way of avoiding the RBI ban. Best described as a way of trading through something called a “hawala” network rather any system connected with an exchange, Dabba is becoming increasingly popular. The trading only takes place through an overseas bank account mainly based in the UK, with Dubai another favorite.

Mainly using the messaging app Telegram its use best explained simply thus:

“The broker accepts money in cash, buys Bitcoins using an overseas trading account and sells them when the bet placed in India is settled. The difference is paid in cash to the customer.”

The KoinEX system offers a P2P trading solution called Loop which offers clients access to the trading of BTC, ETH, and XRP. CEO Rahul Raj explains:

“…buyers and sellers on Loop can create their own listings (like a marketplace) or explore existing listings to choose their best trades,” adding, “…while it’s still early days, Loop has been very well received by the Indian trading community and we are seeing increasing traction every day.”

LocalBitcoins have also seen a local boost to trading since the ban with the Indian rupee (INR) volume increasing 25% from around 68 million rupees to 85 million rupees to August. BTC saw a similar hike in trading volumes with a hike of 23% over the same period.

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Reserve Bank of India Clarifies Why It Targeted Crypto

The Reserve Bank of India has finally clarified its position on cryptocurrencies following this year’s crypto banking ban, writes Bitcoin.com.

The clarification has come due to a request by the Internet and Mobile Association of India (IAMAI) following that organization’s submission to India’s Supreme Court contesting the ban.

Apparently, the RBI’s response to the IAMAI won’t go on the public record but it has been reported that the details are primarily concerning illegal activities plus the validity of cryptocurrencies as units of value within the financial system, according to a source who claims to have seen the document.

The suggestion that the document has returned to the RBI’s original concerns regarding money laundering and investor protection has re-ignited anger and frustration among those affected by the banking ban. The central bank announced the ban in April, affecting around five million digital currency users in India.

Many exchange CEOs in India still maintain that the RBI actions were a knee-jerk reaction to a solvable problem. Nischal Shetty, Wazirx exchange chief argued, “Some of the arguments seem to be around investor protection… but investor protection comes with regulation and not a ban!”

The suggested that the response to IAMAI referred back to its original April statement regarding money laundering provoked a range of reactions from the industry including CEO of Belfrics Praveen Kumar who reportedly suggested that:

“By limiting transactions via bank accounts and allowing more cash-related transactions, RBI is allowing more people to get duped… Instead, they need to regulate the exchanges and lay down guidelines that can help prevent these frauds.”

The RBI had also condemned cryptocurrencies in December of 2017 for lacking intrinsic value and concern which was reportedly repeated in the latest response.

A recent statement by an Indian official has even suggested that the ban won’t hold. Talking to news source Quartz, a senior government official is reported to have suggested that the government is simply waiting to implement a “mechanism to be sure that the money used is not illegal money, and to track its source”, suggesting that rather than banning digital currency, the government simply wants to monitor the flow of cryptocurrency, adding that trading is “not a criminal offense”.

This stance seems to indicate that the ban on India’s exchanges dealing with financial institutions may be ready for another twist at some time in the future.

 

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Crypto Exchanges Challenge India’s Banking Restrictions in Supreme Court

Four more exchange platforms have challenged Reserve Bank of India’s (RBI) prohibition of facilitating Bitcoin and other digital currencies transactions.

This is the third and most significant challenge yet to the ban that has seen banking services to cryptocurrency exchanges entirely blocked off. The platforms that filed the case include Coindelta Exchange, Koinex ExchangeThroughbit Exchange and CoinDCX.

As reported by Mohammed Danish, a practising lawyer at the High Court of Delhi in India, the case has been filled as a Writ Petition (Civil) no. 373 of 2018 under Article 32 of the Constitution, challenging the constitutional validity of RBI’s case.

The new policies adversely affect the business interests of exchanges and start-ups; the first two Writ Petitions came from two such entities that are seeking to protect the right to carry on trade, and rights to equality that are guaranteed in the Indian Constitution.

The initial two Writ Petitions filed in public interest with the Supreme Court are still pending, but will decide the legal status of cryptocurrencies in India. They are representative of the enormous public outcry against RBI’s dictum, as the population of India is well known for being both highly aware and active in the cryptocurrency market. It was reported by Finance Magnets in January this year that India was responsible for 10% of all Bitcoin transactions worldwide.

All three of the Writ Petitions are likely to be heard in Court on 11 May 2018.

The initial restrictions to crypto services

Last month on 6 April, RBI officially directed regulated banks and payment platforms to no longer provide services to cryptocurrency operations, effective immediately. The reasoning from RBI behind this move cited digital currencies as ”[coming] with associated risks‘, following the restrictions from HDFC and Citibank both restricting clients from purchasing Bitcoin via their debit and credit cards.

The initial statement from RBI reads: ”Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer/receipt of money in accounts relating to purchase/ sale of VCs.”

 

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Mumbai Mirror – Bitcoin Arrives

Mumbai Mirror – Bitcoin Arrives:

Ankit Ajmera (@TvventyOne)’s article, published in the Mumbai Mirror, describes Bitcoin’s presence in India. Excerpts:

The Reserve Bank of India, for instance, has not yet formulated regulations to govern trading or profits generated from Bitcoins.”

The only time Bitcoins will come under the purview of law is if a case of fraud is reported, following which cops can then initiate action against the fraudulent party.”

There have been an estimated 29,400 downloads of Bitcoin wallets from Indian IP addresses. There’s the possibility that one person has downloaded more than one wallet.”

 – http://bit.ly/19NOOZ9
 – http://bitcointalk.org/index.php?topic=304384.0 (Further discussion of the article)

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Jonathan Stacke – Bitcoin in India

Jonathan Stacke – Bitcoin in India:

Jonathan Stacke writes on Bitcoin in India for his latest article on The Genesis Block (@TheGenesisBlock). Excerpts:

“With talk of inflation and capital controls familiar to the bitcoin community, one might think Indian citizens would be jumping at the opportunity to adopt the digital currency, yet the hurdles to wide-scale bitcoin proliferation in India may be significant for the foreseeable future. While demand for gold has grown in India, the multiple applications it offers culturally and industrially in addition to acting as an alternative store of wealth may mean that such demand does not translate to bitcoin.”

“[A correlation exists] between bitcoin adoption and internet penetration in a given country. India, with just 12.6% of its citizens having internet access, has the sixth lowest internet penetration of the 100 largest countries. Despite that fact, the size of the total Indian population – more than 1.2 billion – makes India the third largest internet-using population in the world, with 150 million users, behind only China and the US.”

“It is possible to buy and sell bitcoin through a number of websites including buysellbitco.in and there does appear to be a healthy LocalBitcoins market.”

“Not to be overlooked is India’s mobile phone penetration of 71%, or approximately 900 million total users. […] only 44 million Indians are smartphone subscribers.”

“M-PESA, the mobile payment system that has changed the lives of millions in Kenya recently rolled out in India. […] If mobile payment systems like these gain traction in India as they have in Africa, acceptance of digital currency would prove to be a less significant hurdle.”

“India had the highest remittance volume in the world in 2011 with $58 billion, or 3.1% of GDP, according to the World Bank.”

“Forward-thinking companies like Buttercoin have recently stepped in to apply the potential of bitcoin to these markets […]”

“The Reserve Bank of India has stated that it does not immediately intend to regulate bitcoin, but their historic actions indicate that may change soon enough […]”

 – http://thegenesisblock.com/bitcoin-in-india-drivers-and-barriers-to-adoption
 – (Further discussion of this article)

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