RBI has dealt a body blow to both cryptocurrency investors and traders. In a circular on Thursday, the central bank called for ring-fencing of regulated entities such as banks from risks associated with virtual currencies. Heeding to RBI's warning, various banks in the country have begun cautioning their customers about transacting in virtual currencies.
Following RBI's ban, Yes Bank, in an email to its customers said, "We prohibit the use of YES BANK - Debit Card, Credit Card, Net Banking, Mobile Banking, Digital Wallet, Prepaid Cards and Travel Cards towards purchase of or trading in virtual currencies."
"Future transactions pertaining to the above stated reasons will be blocked without any liability or responsibility on the part of the bank," the private sector bank added.
Though the banks have 'prohibited' their customers from dealing in crypto assets, experts believe that there is no reason for investors to get jittery. Jatin Malwal, Co-founder and CTO at Lendbox told Business Today that the RBI move is a setback for those investing in crypto currencies but only in the short run.
"I doubt this will be anything more than a blip in the long term picture where blockchain technology and decentralised finance has a very big role to play. We believe that in the long run, government would have to bring regulated fiat to crypto trade in the country to keep up with the rest of the world," Malwal said.
In a bid to calm frayed nerves of cryptocurrency investors, the RBI has given a three month window to banks to unwind any existing business relationship with those dealing with Virtual Currencies (VCs).
Shivam Thakral, co-founder and CEO of cryptocurrency exchange of BuyUcoin believes that if the RBI remains rigid on its decision then it would eventually make them to close the fiat part from their exchange. "Then we have to turn our exchange into crypto-crypto thing," Thakral said.
If that happens, the investors won't be able to buy cryptocurrencies directly from the exchanges.
The Way Around
But even those who don't want to sell their holdings now may have a way out. "The entire purpose of blockchain-based digital asset technology is to provide peer-to-peer transfer of value at a global scale. Transfer of digital asset from an Indian exchange to an international one is as easy as clicking a button, Thakral said.
While Malwal believes it is an investor's individual decision to sell cryptocurrencies in the wake of RBI's three-month window, he adds that there are always ways to transfer the crypto assets to an international exchange and get the money remitted from there.
While the banking regulator - after its back to back warnings - has finally sounded a death knell for crypto assets, the confusion over its current status has baffled the investors.
Cautioning about panic-selling that is going on ever since the RBI came out with its circular, Thakral said, "Even if risk-averse investors want to sell out, they should wait for some time because the panic-selling is going on and the rates in India cryptocurrency market are way low than the international market. It's not a good move to sell your assets now."
RBI's three-month window to banks to wrap up existing business dealings with cryptocurrency exchanges may have come as a blessing in disguise for seasoned cryptocurrency traders. "Lots and lots of people are buying at cheaper rates because of panic-selling," Thakral said.
"It's not like they are going to shut banking channels immediately. It will happen over a period of three months," an unflustered Thakral said.