RBI ask banks, others not deal with entities related to bitcoins

The RBI today asked banks, NBFCs and payment service providers to disassociate themselves from entities dealing with virtual currencies (VCs), including bitcoins, with immediate effect.

The notification comes a day after the central bank in a 'Statement on Developmental and Regulatory Policies' warned of risks associated with virtual currencies.

The Reserve Bank of India (RBI) has repeatedly cautioned users, holders and traders of virtual currencies, including bitcoins.

"In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs," the notification said.

The services flagged by the RBI include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, among others.

The instructions are applicable to all commercial, co-operative banks, payments banks, small finance banks, non banking financial companies (NBFCs) and payment system providers.

In his Budget speech on February 1, Finance Minister Arun Jaitley had said that cryptocurrencies are not legal and affirmed to eliminate their usage.

Since then, top banks, including HDFC Bank, SBI and the American lender Citi, have virtually stopped supporting cryptocurrencies related transactions, resulting in what reports said was a 90 per cent decline in trading.