Indian Finance Minister Arun Jaitley earlier this year reported that the authority considered digital currencies illegal and would do everything possible to stop crypto payments.
India's central bank, Reserve Bank of India (RBI), has barred all entities regulated by them - including banks and financial institutions - from providing services to businesses that deal with virtual currencies. Though several exchanges and investors have been wary over regulatory uncertainties over the past two to three months and have been preparing to face an untoward policy change, they were caught unawares that RBI would so abruptly come up with such a harsh decision.
Mumbai: In what could adversely affect the trading of crypto-currencies such as the bitcoin, the RBI on Thursday said entities regulated by it cannot deal or provide services to individual or others transacting in such currencies.
Once the banks close their business with these exchanges, the move will also affect those looking to withdraw money by selling their existing crypto holdings.
Consequently, operating a cryptocurrency business has gotten tough as it was reported back in January that the Ministry of Corporate Affairs has stopped registering any cryptocurrency exchange.
The directive, though seemingly harsh, is not the first of its kind. This amounts to a ban on banks in dealing with companies or individuals that trade in cryptocurrencies.
However, RBI's latest attempts to curb the flow of decentralised digital tokens such as Bitcoin appear to be slightly complicated.
Numbers 12 and 13 are of particular interest to cryptocurrency enthusiasts.
The mandate further discussed that the government had constituted an interdepartmental committee that will submit a report on the feasibility of a fiat digital currency. The digital payments ecosystem in the country has grown owing to the rise of new payment systems, players and platforms. These are issued by the central bank, are considered the liability of the central bank.
"In order to have unfettered access to all payment data for supervisory purposes, it has been decided that all payment system operators will ensure that data related to payment systems operated by them are stored only inside the country within a period of six months", the RBI said in a report.
Around the world, governments are ramping up regulations, as the industry looks to settle and mature in the years going forward.