Following its latest Monetary Policy Committee (MPC) meeting, the RBI prohibited regulated entities (such as banks and payments gateways) from conducting transactions in bitcoin. It also gave banks and entities with existing bitcoin relationships a fixed amount of time (likely to be three months) to exit these relationships.
The first bank to join the crypto “banwagon” after the RBI’s latest decision is Yes Bank. It has banned transactions in bitcoin through its cards and/or net banking, mobile banking, digital wallets, prepaid cards and so on. Earlier, banks like HDFC Bank and Citibank had acted against bitcoin by banning purchase through debit and credit cards.
You can find the text of the Yes Bank notification below:
What the RBI said
The RBI said in its recent monetary policy announcement that it has banned banks, NBFCs, eWallets and any other intermediaries regulated by it from providing services to cryptocurrency dealers with immediate effect. Regulated entities which already provide such services are to be given a time-frame (most likely, three months) to exit.
The RBI announcement thus does not ban bitcoin per se. Existing bitcoin holders can continue to hold the virtual currency. However, they will not be able to purchase or sell bitcoin through banking channels such as cards/wallets or net banking.
As we write here, this is likely to drive trading in the virtual currency into cash. Note however that single cash transactions above Rs 2 lakh are not permitted. It can also spur a flight of cryptocurrency exchanges to jurisdictions outside India. An Economic Times article notes that this may already be underway. The notification also makes the virtual currency almost wholly illiquid, thereby creating problems for cryptocurrency traders who owe tax on their transactions.
In the meantime, a change.org petition has gathered 17,000 signatures asking for the ban to be revoked.