The Reserve Bank of India’s decision to bar banks and financial services companies from dealing in virtual currencies or related entities will hurt innovation, besides leaving stranded those who had bought such assets or built businesses upon them. At least according to the fintech and payments industry.
While the government is expressing interest in the blockchain technology and the RBI is considering its own fiat digital currency, the central bank has virtually banned private virtual currencies, such as bitcoin, based on risks involved, Navin Surya, chairman of Payment Council of India, a group of payments industry, told BloombergQuint.
“Risks exist in every system but we have solutions to each of those,” Surya said. So why not work with virtual currency traders in a similar way and create a risk-free system rather than indirectly shutting it down, he said.
The RBI’s move comes as regulators globally have expressed concerns over virtual currencies. Bitcoin prices had surged last year and peaked at about $20,000 in December, leading to concerns about asset bubbles. A series of curbs have since pulled it down, with steep losses since the beginning of this year.
While India has not made virtual currencies illegal, they have continuously that virtual currencies do not enjoy legal tender status like fiat currency does. The RBI’s latest move, though, virtually shuts down the ecosystem.
The RBI’s decision is a safe move but not good for innovation, said Kunal Nandwani, founder and chief executive officer at uTrade, a fintech firm. “You can’t not take risks and expect to innovate.”
Watch the full interaction here:
Here are the edited excerpts of the interaction:
The old finance universe keeps saying that anything you do which is midway, always lets people find a way around it. So, if they have to clamp down, they have to do it entirely.
Navin Surya: I think clamping down is not a solution. Because if you clamp down on anything that is organized, it will move to unorganised. In fact, when it is organised you can track what is happening, you could find actions and solutions to risk that it was creating. I find this approach very funny. What could be solved with an organised regulatory systemic approach is bring brought down by doing indirect things. Whatever is happening systematically, we are bringing it down. By trying to protect consumers, we are actually leaving them in a lurch. What will happen to these consumers now? The crypto markets are at an all time low in cryptocurrencies. They are now being forced to sell. They have no solution.