While the blockchain and bitcoin industry was making merry and expecting a dream run this year in India, the country’s Central Bank’s latest notice might dampen their spirits.
In the notice issued to the users of virtual currencies in the country, the Reserve Bank of India (RBI) has urged them to be extra cautious while engaging in any digital currency-related activity. In fact, IndianWeb2 had already reported earlier that post demonetisation, the Indian Government was now planning a crackdown on Bitcoin.
Since the November 8 demonetisation announcement, wherein the Indian government had banned the circulation of previously issued currency notes of 500 and 1,000 denomination and replaced them by fresh currency notes of 500 and 2,000 denomination, the bitcoin industry in the country saw a significant increase in demand.
Post-demonetisation, bitcoin has been successful in garnering immense popularity among the Indian masses as they were looking for alternative ways to counter the cash crunch that the Indian government had suddenly sprung on them. Service oriented Zebpay saw a massive upsurge in interest and within just 18 days into demonetisation, the price of one bitcoin on Zebpay increased from ₹51,600 to ₹69,500. Not only Zebpay, even Indian bitcoin startup Unocoin witnessed a price hike of about 20% while BTCXIndia saw an price increase of as much as 40%. Furthermore, bitcoin price in the country was quoted at nearly 25-28% premium, as compared to global standards.
RBI’s latest notice reads, “The Reserve Bank of India advises that it has not given any licence / authorisation to any entity / company to operate such schemes or deal with Bitcoin or any virtual currency. As such, any user, holder, investor, trader, etc. dealing with Virtual Currencies will be doing so at their own risk.”
RBI has always been sceptical about bitcoin usage in India and has always made it opinion known to the Indian citizens. In 2013, it had said that it was closely following the developments relating to “Decentralised Digital Currency” or “Virtual Currency” (VCs), such as Bitcoins, their usage or trading in India.
At that time, the RBI had said, “The creation, trading or usage of VCs including Bitcoins, as a medium for payment are not authorised by any central bank or monetary authority. No regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities. As such, they may pose several risks to their users.”
While bitcoin is on RBI’s radar, the Central Bank is quite optimistic about Blockchain and its usage. We had recently reported about how RBI’s research arm, Institute for Development & Research in Banking Technology (IDRBT), had recently published a report stating that it has tested the blockchain technology for core banking processes in the country and considers that now the time is right for the technology’s wide adoption in India.
The white paper named “Applications of Blockchain Technology to Banking and Financial Sector in India” is a hard work of two years study, research, and interactions with academicians, organizations, banks and technology partners working in the area.
According to the report, the blockchain technology has the potential to address certain limitations of the current financial processes by modernizing, streamlining and simplifying the traditional siloed design of the financial industry infrastructure with a shared fabric of common information. The advantages brought of the technology can be broadly classified into cost savings, efficiency, and transparency.
In the white paper, the IDRBT has clearly outlined a prospective roadmap for the adoption of blockchain technology in India’s banking and finance sector.