RBI ban on cryptocurrencies takes effect; prohibition could force investors to tap the black market

With the Supreme Court (SC) refusing to stay a Reserve Bank of India (RBI) order prohibiting banks and financial institutions, regulated by the central bank, from dealing in virtual currencies (VCs), investors could reportedly consider a barter or tap the black market to continue trading in cryptocurrencies.

The central bank's prohibition kicked-in on Thursday.

And, according to The Times of India, those still holding bitcoins and looking to unlock value will have to consider peer-to-peer (P2P) deals. In India, that will see investors trading their bitcoins for other VCs, like litecoin. The ban could also force sellers and buyers to transact vial an online marketplace, or even tap the black market to convert VCs to rupees, the newspaper added.

On Tuesday, a bench headed by Chief Justice Dipak Misra reportedly pushed out notices to the ministries of finance, law and justice and information technology (IT), and to the RBI, tagging the matter at hand along with similar cases.

 RBI ban on cryptocurrencies takes effect; prohibition could force investors to tap the black market

Representational image. Reuters.

The RBI has repeatedly cautioned users, holders and traders of VCs, including Bitcoins, regarding the various risks associated in dealing with such cryptos.

In May, it was reported that people were rushing to take advantage of a three-month window the RBI had given to banks to sever ties with cryptocurrency traders and exchanges.

According to a 6 April RBI circular, entities regulated by the RBI are prohibited from “providing any service in relation to virtual currencies, including those of transfer or receipt of money in accounts relating to the purchase or sale of virtual currencies".

Cryptocurrencies are digital currencies that use digital encryption techniques to regulate the generation of currency units and verify the transfer of funds. VCs operate outside the purview of a central bank.

With inputs from agencies

Updated Date: Jul 06, 2018 21:11:06 IST