Reserve Bank of India (RBI), the central banking institution of the country, has banned banks and other financial institutions from processing crypto currencies.
In a statement, the central bank said that it has repeatedly alerted users, holders and traders associated with processing virtual currencies about their various risks.
Accordingly, RBI has directed all entities under its regulation not to engage in any form of services associated with processing virtual currencies with immediate effect.
All entities that already provide these services are required to terminate their relationship within a fixed time, to be notified later.
Earlier in the budget speech, Union Minister of Finance Arun Jaitley stated that crypto currency is not a legal tender and the government will continue to discourage its use.
The RBI statement also stated that these “crypto currencies and crypto assets raise concerns of consumer protection, market integrity and money laundering, among others.”
These crypto currencies gained popularity across the globe recently. However, many countries took various steps to restrict its usage or banning it completely.
However, RBI also noted that it will explore the utilisation of blockchain technology in supporting financial inclusion in the country.
It also constituted an inter-departmental team to study the feasibility and provide guidance to introduce a central bank digital currency.
The report is scheduled to be submitted by the end of June this year.