Reserve Bank of India (RBI) aka the central bank of India that controls monetary policy notified banks and financial institutions to stop servicing entities and individuals that deal with cryptocurrencies.
The policy is not entirely effective immediately. The banks that are already servicing crypto-entities have a three month period to unravel their existing ties.
And the Indian cryptocurrency exchanges have very less time to introduce a new business proposition. Although, it is unclear that how these exchanges will be servicing the existing Indian customer base. And many exchanges are considering to shift their headquarters to cryptocurrency friendly jurisdictions like Singapore, Cayman Islands, and Estonia.
After the initial public announcement on 05 Apr 2018, the investors panicked. And the local exchange rates fell more than 20%. And the event also bruised the global crypto-market although the Indian market is smaller than that of Japan and U.S.A.
Moreover, the regulatory move is also hurting the raising Initial Coin Offering scene in the nation.
Cryptocurrencies are not illegal
The Reserve Bank of India, however, has not declared digital currencies illegal. So the citizens can still possess crypto-assets and can deal them in cash. Now the services like LocalBitcoins will come in handy, where people can find cryptocurrency buyers and sellers, and can complete the trades in person.
The Indian cryptocurrency face will soon move back to a point where it was a few years ago.
In spite of that, in a public statement, RBI has expressed its interest in creating a fiat digital currency stating,
“Rapid changes in the landscape of the payments industry along with factors such as emergence of private digital tokens and the rising costs of managing fiat paper/metallic money have led central banks around the world to explore the option of introducing fiat digital currencies. While many central banks are still engaged in the debate, an inter-departmental 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.”