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Will RBI launch its own fiat digital currency?

Will RBI launch its own fiat digital currency?”

"It has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling [cryptocurrencies]".

In a major crackdown on cryptocurrency trading, the Reserve Bank of India (RBI) on Thursday banned all the banks and financial institutions from dealing with virtual currencies including Bitcoins.

In the same statement on Thursday, the RBI said that it had put together a working group to study the issue of issuing its own digital currency.

India's central bank has announced a ban on the sale or purchase of crypto-currency. "They are required to stop having a business relationship with entities dealing with virtual currencies forthwith and unwind the existing relationship within three months". The group will submit its report by June.

The financial instruction reminded Indian residents it has in the past issued multiple warnings regarding cryptocurrencies and the risks associating with them.

Is it fair for the RBI to ask banks to not serve crypto businesses?

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RBI's move to clamp down on the crypto-currencies comes two months after Finance Minister Arun Jaitely in his Budget speech said digital currencies can not be recognised as a legal tender. According to the petition, the decision from RBI cuts the wings of entrepreneurs who strive to work on cryptocurrency and blockchain technology projects.

This could slow down exchange operations in the country significantly, potentially bringing the cryptocurrency market to a crawl.

Bitcoin, one of the premium currency flavours, was trading at $6775 per coin, and post the RBI announcement the price was $6797.44.

"Several central banks are debating the possibility of introducing a fiat digital currency". Regulatory bodies in countries like China, South Korea and Canada have, during the past year-and-a-half, imposed a partial or complete ban on cryptocurrencies. The operators will be given six months' time to comply with the directive of the central bank.

It is worth noting that the leading Indian banks including the HDFC, AXIS, YES, ICICI and Kotak Mahindra Bank have already stopped a slew of their services to cryptocurrency exchanges and other entities and traders. The digital payments ecosystem in the country has grown owing to the rise of new payment systems, players and platforms. By, which would be easily stabilized, and would even red introducing a state-backed currency, RBI would be able to reduce the costs of printing paper money.



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