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Central Banks of India and Pakistan Tighten Leash on Virtual Currencies

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In its bi-annual monetary policy, the Reserve Bank of India barred banks from having any official links with entities dealing in virtual currencies. This was followed by heavy slashes in prices of all coins on local exchanges across country.

In a separate statement, Pakistan’s central bank disdained cryptos stating they weren’t legal in the country.

The central bank laid out clear instructions asking banks operating in Pakistan to refuse customers seeking cryptocurrency transactions. And emphasised that people using cryptocurrency to transfer fund outside Pakistan would invite prosecution.

Indian government and RBI warned general public regarding cryptos and Central Government has vowed on eliminating use of digital currency in the country which it considers illegal. As a first step towards this, entities under the purview of the RBI are prohibited from dealing in any cryptocurrency.

“This seems to be a very aggressive move,” said technology law expert Namita Viswanath, a principal associate at IndusLaw.

“Instead of the RBI taking a holistic approach and seeing how to curb potential misuse, it seems to be a rather broad-stroke approach of completely prohibiting this altogether.”

Late on Friday the RBI issued a more detailed circular stating any regulated entities that already provide virtual currency dealing services will have to cut all ties within three months.

Thursday’s announcement raised concerns about the exit options for investors who currently hold crypto-currencies.

The Block Chain and Cryptocurrency Committee’s Gupta estimated that at least 4 to 5 million people in India hold some kind of crypto-currency and that 60 percent of them entered the market between October and December, when prices were at a peak.

“Most of these people are already sitting on capital losses,” he said. “Now the asset has become dead. You can’t transact with it. If you transact with it, your bank accounts are going to be shut.”

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