Cryptocurrency exchanges in the country are exploring legal options after the RBI on Thursday virtually banned them by stopping transactions through banks. The banking regulator has said that all financial entities regulated by it shall not carry out transactions with individuals or businesses dealing in virtual currency. This essentially means that investors will neither be able to make new investments in cryptocurrencies nor will they be able to cash out.
As a result, the entire cryptocurrency market in India has gone into a state of panic. "Investors are very worried. Because of the panic, everybody is going for a sell order," says Hesham Rehman, cofounder of Bitxoxo, a cryptocurrency exchange. Rehman believes that around 20 lakh people would get affected because of the RBI's latest move.
Bitcoin prices in India have dropped by as much as Rs 40,000 per bitcoin from the weekly high price of Rs 4,87,606 (as on April 4) to Rs 4,44,740, according to CoinGecko.
"The Indian market has accepted cryptocurrency as an asset, which can be traded in an open market. Now, you cannot altogether ban something when so many people have invested in it and rely on it as an asset. No doubt, there have been crooks in the market but you cannot penalise the investors because of that. It should not reflect on the currency itself. This may lead to demonisation of cryptocurrency," says Vishal Gupta, cofounder of the industry body Digital Assets and Blockchain Foundation of India (DABFI).
The government has been issuing its reservations on cryptocurrency from time to time. In February, the income tax department had sent notices to 5 lakh high-networth individuals (HNIs) for not declaring profits earned from cryptocurrencies.
Finance Minister Arun Jaitley, in his budget speech, had also said that all cryptocurrencies, which include bitcoins, are illegal and the government will take all measures to eliminate their use.
The Blockchain and Cryptocurrency Committee, a representative body of cryptocurrency exchanges, is taking up the issue and will soon take a legal recourse.
Uncertainties and frequent government interruptions have forced companies like Bitxoxo to explore markets outside India. Bitxoxo is setting up base in Australia, where cryptocurrencies are more regulated and therefore thriving. It will significantly cut down its presence in India and will be available merely as a wallet.