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Without saying so categorically, the Reserve Bank of India (RBI) as good as banned crypto currency on Thursday. As a result, prices of bitcoin and other crypto currencies on Indian exchanges have crashed.
Bitcoin was trading at $6,950 in international market just before RBI announcement but in India on Zebpay, a leading crypto exchange, it was quoting at Rs 500,000 at an almost 8 per cent premium. However, at 11:30 pm IST, global price of Bitcoin was $6,701, which works out to Rs 435,565 in rupee terms (1 dollar=Rs 65) but on Zebpay the price is quoted at Rs 340,400, a 27 per cent discount.
In line with bitcoin, the price of around 10 other crypto currencies has also fallen. Sources explained that trading in other cryptos was allowed recently; that in bitcoin was on for years; hence, many investors were making distress sales. All other currencies -- Ether, Ripple, Litecoin, etc -- were quoting at similar discounts.
Vaibhav Parikh, partner at Nishith Desai Associates, said: "This move of RBI will force banks to stop dealing with virtual currency companies. It means such companies will either have to start dealing in cash or close down. This is a retrograde step by RBI."
The RBI move, once fully implemented, will not allow transferring of money to a crypto exchange to buy any such currency or to encash these by ssale or money transfer by using the NEFT or UPI route. All regulated agencies, RBI said, must cut all such dealings in three months.
Vishal Gupta, founder of binex.trade, a crypto currency exchange and co-founder of searchtrade, a key word buying company, said: "What the government has said is vastly different from the ongoing myths. The Indian market has accepted crypto currency as an asset which can be traded in an open market. 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 might lead to demonisation of crypto currency."
There are said to be around a dozen exchanges and about five million investors in India dealing with crypto exchanges. Several hold crypto currencies in the international market and outside India.