If you have holdings in cryptocurrencies, in spite of Reserve Bank of India’s (RBI) warning in December and the government’s word of caution earlier this year, the latest RBI announcement may have worried you. Last week, the RBI clamped down on cryptocurrency-rupee trading in the country.
The RBI has given a three-month window to regulated entities such as banks and non-banking finance companies (NBFCs) to wind up existing relationships with firms or individuals dealing in cryptocurrencies.
Rationale by RBI
Virtual currencies can “adversely impact market integrity and capital control. And if they grow beyond a size, they can endanger financial stability as well.”
Are cryptocurrencies legal?
There is nothing that indicates a ban on crypto assets by the government or the RBI. But there is a clear negative attitude towards cryptocurrencies Whether it will translate to further action, we will have to wait and watch.
Finance minister Arun Jaitley, in his budget speech had said, “The government does not consider cryptocurrencies legal tender… and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system.”
In the past few months, major banks have barred transactions related to cryptocurrencies.
Some banks have also closed current accounts of crypto exchanges operational in India.
Though cryptocurrencies can still be bought through NEFT, RTGS, IMPS and UPI services by some banks and financial institutions, these too will close in three months.
What about existing holdings?
If you are an investor, the only change for you is that you will not be able to get the proceeds in your bank account if you sell after three months. You will continue to have your holdings even after three months. You can even sell it after that but you may not be able to withdraw the money in your bank account and will need to convert it into some other crypto asset.
Should you exit now ?
If you want to redeem your crypto assets in rupees into your bank account, then this is the chance. After three months, you will have to trade in crypto assets or sell through other channels.
If you are unable to exit or choose not to exit in the three-month window, look at your options in the future and consider the risks, which seem to be very high. New investors should stay away.
(Adapted from Live mint)