Fostering dialogue with industry-regulators on the RBI directive
Regulatory framework is better than a ring-fencing approach
It has been a rather disquiet time since yesterday afternoon, when the sudden news flash across the market shocked the crypto-community. There was a RBI directive issued to the financial institutions, admonishing them to exit their services in the virtual currency space.
The media reports also painted a very grim situation because they chose to highlight only one aspect of the entire narrative. Even the immediate conversations across social media platforms and community forums were rather distressing, because we all just assumed the worst. There was a sudden volatility in the market due to panic trading, in this frenzy, but, we need to hold our nerves and look at the situation more objectively, and in a holistic manner.
Below is the excerpt from the press release issued from the RBI directive:
13. Ring-fencing regulated entities from virtual currencies
Technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system. However, Virtual Currencies (VCs), also variously referred to as crypto currencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others.
The Reserve Bank of India has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In view of the associated risks, 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 VCs. Regulated entities which already provide such services shall exit the relationship within a specified time. A circular in this regard is being issued separately.
To begin with, the RBI has not rendered crypto-currency as ‘illegal’ in their directive, so all the tokens are very much still a valuable asset. The RBI has given banks a stipulated timeframe to settle their accounts with the exchanges, so there is enough time to ensure that all transactions are honoured. Also, this time, essentially will allow the crypto-industry to come together and initiate a dialogue with the relevant stakeholders and regulators, to table our concerns and recommendations, such as to regulate the sector, rather than create a tumultuous situation with their incumbent directive. The RBI has proposed a detailed circular elucidating their perspective further (mentioned in the above excerpt), so the industry needs to ascertain the next steps in the larger interest of the community and to promote the development & adoption of blockchain technology in India.
The situation is very hazy as of now, since there are numerous legal and industry facets that one can administer, and we, as a unified ‘crypto-industry’ are steadfast to resolve this predicament. The crypto-market globally has also faced innumerable challenges and governing roadblocks, but remained unfazed and has grown in stature, value and set pace to the transformational story of digital currency in the whole ecosystem. So we hope that this knee-jerk action from the RBI is also just another hiccup in our transformational story and it will not hinder our aim to make India, the hotbed of blockchain technology.
As part of the largest digital assets exchange in India, Aditya, Rakesh and myself, did have a worrisome time, but we are still affirmative and assure all our dear users that we are reaching out to the industry stalwarts across all departments for advice and support and will make a concerted effort to sail our way through this storm.
We at Koinex also take this moment to thank all our users who have sent personal messages, tweets, emails and even support tickets assuring their belief in us, our product and our industry. It was a much needed motivation for us.
We will keep you updated with all the developments on a regular basis and for now business runs as usual at Koinex.
Stay patient, stay informed.