The Reserve Bank of India (RBI) has ordered all regulated financial companies to end within 90 days all services to individuals or businesses dealing with bitcoin and other cryptocurrencies using blockchain technology.

The order essentially bars traders from using the banking system to buy or sell virtual currencies for rupees online.

But the central bank’s curb on cryptocurrencies has prompted protests that the RBI is denying India an opportunity to play a key role in this burgeoning technology and radically new way of transacting.

Protests heard

Critics of the RBI say India’s cryptocurrency market has been compromised by the country’s tough regulations, particularly its system of capital controls, which essentially bar Indians from using local bank accounts to trade in cryptocurrencies on international exchanges.

India’s banks are obliged to limit annual international financial transfers of conventional currencies to US$250,000 per person, but no such limit has applied to prevent Indian traders moving cryptocurrencies abroad. Once the RBI’s latest ban comes into force, the same limit will apply to trading in cryptocurrencies.

Global concerns

Several countries have raised concerns about the use of cryptocurrencies in trade-based financial crime.

Countries from Algeria to Bangladesh have prohibited their use and China said last year that it wanted to close down cryptocurrency exchanges.