After issuing repeated warning about investing in cryptocurrencies, the Reserve Bank of India (RBI) has finally bought the gauntlet down. As part of its bi-monthly monetary policy statement, the central bank stated that, with immediate effect, entities regulated by it can no longer deal with or provide services to any individual or businesses dealing with or settling virtual currencies. A circular on the same will be issued soon, the RBI said.
This will impact nearly 50 lakh Indians who have invested in cryptocurrencies, as well as India’s crypto exchanges. Bitcoin investments in India are estimated to be in region of $2billion.
Although, the policy statement has effectively put a ban on making new investments in cryptocurrencies with immediate effect, existing investors have been given a window: “We have decided to ring-fence the RBI regulated entities from the risk of dealing with entities associated with virtual currencies.
So, if you have investments in any virtual currencies, you now have three months to make up your mind on what you should do – get out or stay put.
What existing investors can do
Now, RBI’s statement on cryptocurrencies is directed mainly at banks, but this diktat will have an impact on the investor, because you need fiat currency to trade in virtual currency. When that channel is plugged, there is obviously a reason for retail investors to worry – even if they want to exit, it will be troublesome.
Further, unlike other investment avenues, cryptocurrencies are not regulated by the government entities nor does a regulatory body watch over it. Investors have no official authority to redress their grievances.
It is not just the apex bank that has clamped down on virtual currencies, the government, too, has issued stern warnings. Arun Jaitley, in his budget speech, said that the government does not recoginse cryptocurrencies as legal tender. Going will only get tougher for cryptocurrencies, its exchanges, and its investors. If you do not want to take that kind of risk with your money, it would be best to get out.