India’s central bank has announced a curious two-faced position towards cryptocurrencies, expressing displeasure over the use of “cryptos” because of money laundering and financial stability concerns – then saying it was looking at the possibility of creating its own digital currency to reduce reliance on paper money.
In its first policy announcement for the 2019 fiscal year, the Reserve Bank of India (RBI) said banks and other regulated entities cannot provide services to users, holders and traders of cryptocurrencies.
This led to panic selling among Bitcoin traders on Thursday with its value falling from 460,000 rupees to 350,000 rupees ($7,074 to $5,383) after the RBI announcement, the Times of India reported.
But the central bank said a panel would also submit a report by June on the desirability and feasibility of introducing a virtual currency backed by the government.
The RBI explained that it is looking at digital currencies to cut the cost of paper and making transactions more efficient, but said the system would not entirely replace paper currency.
It felt that cryptocurrencies could seriously undermine the moves to counter money laundering as well as the Financial Action Task Force, which seeks to block the funding of terrorism. They could also have an adverse impact on market integrity, capital controls and even endanger financial stability.
Crypto-trading platforms such as Unocoin and CoinSecure were trying to pacify Bitcoin investors from panic selling after the announcement.