Tweets by “Blockchain Lawyer” Indicate Reserve Bank of India Decided to Restrict Banking Services to Blockchain Companies with Little Research

In April of this year, the Reserve Bank of India (RBI) commented on the status of cryptocurrencies. The RBI stated

“we have decided to ring fence the RBI regulated entities from the risk of dealing with entities associated with virtual currencies. They are required to stop having business relationship with entities dealing with virtual currencies forthwith and unwind the existing relationship in a period of three months time.”

The RBI also commented on the potential of blockchain to improve efficiencies and stated they have created an “inter-departmental committee in Reserve Bank of India who will produce a report and they will explore the feasibility and desirability of issuing a digital currency.”

Last week, as revealed in a series of tweets by Blockchain Lawyer it appears the RBI did little research before banning access to banking services for blockchain based companies. This was uncovered in a Right to Information request.

 

 

 

Perhaps this is a situation of, if you don’t understand it, ban it. But it is more than a touch ironic that public officials acknowledge the potential of blockchain (or distributed ledger technology) on one hand and then on the other hand shut down the possibility for any crypto company to operate in India. Innovation and change almost always entails risk and it appears that RBI officials fear this change could result in untenable level of insecurity. Since India is the 7th largest economy in the world, perhaps it would be worthwhile if they follow through on their commitment to research the emerging technology?

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