BENGALURU: The Central bank’s latest clampdown on virtual currencies has triggered defiance and outrage among traders, who insist they will continue dealing in cryptocurrencies using cash and other means.
On Thursday, the Reserve Bank of India mandated banks, e-wallets, and payment gateway providers to withdraw support for cryptocurrency exchanges and other businesses dealing with virtual currencies in India.
“Regulated entities which already provide such services shall exit the relationship within a specified time,” RBI said in a notice. RBI has already cautioned people regarding the financial and legal risks associated with virtual currencies.
Crypto traders took to Twitter and other social media platforms to call for a campaign against RBI’s decision, many tagging their messages with #RBICantStopMe.
After the RBI notice, the price of bitcoin in local exchanges dropped 10-15%.
“There are many alternatives still. Cash will do the work,” said Praveen Kelekar, a Bengaluru-based crypto trader. “As long as they don’t declare (cryptocurrencies) as illegal we will continue transacting. It is just that we will do it in cash, like in the early days.”
Websites like localbitcoin.com allow individuals to exchange their local currency for bitcoins. By posting an advertisement, individuals can state their exchange rate and payment methods for buying or selling bitcoins.
“If the government wants to curb black money and levy tax on the transactions, they have to regulate all channels for fund flows. Shutting them down defeats the purpose of regulation,” said Anirudh Rastogi, Managing Partner at TRA, a technology law firm. “Now, banks will not be able to have any fund flows that happen through regulated entities.”
The government is in the last leg of finalising a regulatory framework for the cryptocurrency sector, which was expected to be issued by the end of March. It has been pushed by three months.
The uncertainty has already prompted some Indian exchanges to seek greener pastures.
Bitcoin exchange Bitxoxo has moved base to Australia. “We will be starting operations in Australia next quarter. Since regulations are not clear in India we are incorporating in Australia,” said Heshman Rehman, chief of Bitxoxo. Ahmedabad-based exchange Zebpay, too, has an entity registered in Singapore.
This also poses the issue of Indian traders not being able to trade if the exchanges move to other countries. “If they move to another country, Indian customers cannot trade overseas. Businesses will move offshore but it’s a larger problem for the end-user,” said Vishal Gupta, cofounder of Digital Assets and Blockchain Foundation of India (Dabfi).
India has 3-5 million active cryptocurrency traders, according to industry estimates. The total volume of Bitcoin transactions across all major exchanges goes up to 1,500 bitcoins a day. Other cryptocurrencies like Ripple, Ethereum and Litecoin constitute the same volume.
“A few are already operating in another jurisdiction or may become crypto-to-crypto until regulation changes or new licensing norms appear,” said Nitin Sharma, cofounder of Incrypt, a blockchain community. “Longer-term decentralised exchanges will also become important.”