The Reserve Bank of India (RBI) recently banned banks from working with individuals or businesses dealing with digital currencies. On April 6, 2018, the State Bank of Pakistan (SBP) followed in same footsteps. The SBP mentioned in a separate statement that cryptocurrencies were no longer legal in Pakistan.
According to Reuters, the SBP like the RBI told banks and other financial providers to halt and refuse any customers are looking to undergo cryptocurrency transactions. Anyone looking to transfer money outside of Pakistan can also face prosecution.
SBP and RBI’s approach to cryptocurrencies appears very strict. “This seems to be a very aggressive move,” said technology law expert Namita Viswanath, a principal associate at IndusLaw, to Reuters. “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.”
India sees Cryptocurrency Investments as Ponzi Schemes
India’s decision to prohibit banks from accepting cryptocurrencies is a surprise. According to BloombergQuint, the RBI previously issued several warnings to the public. India also previously linked cryptocurrency investments to Ponzi schemes that offered early investors unusually high returns.
As a result of the ban, as reported by Coinome, the price of bitcoin in India fell to 350,000 rupees ($5,392). The rate was significantly lower rate than the international market’s price of $6,617.
The RBI also mentioned that any regulated entities that provide cryptocurrencies need to halt their services within three months. The announcement was also a great concern for investors who currently hold cryptocurrencies and are looking for exit option.
According to Vishal Gupta, co-founder of the Digital Assets and Blockchain Foundation in India, the government’s decision has a “demonetization” like effect on cryptocurrencies. In an interview with BloombergQuint, he mentioned that the decision would have large repercussions, especially when there are at least four to five million people in India that own cryptocurrencies. It “effectively means people lose ability to conduct any trade or exchange at least in the open market.”