As per a recent Reserve Bank of India action, banks have been told to discontinue banking services to those dealing with virtual currencies
As the RBI deadline for banks to stop doing business with cryptocurrency exchanges in India expires on July 5, one of the biggest digital currency exchanges in India Zebpay has asked its users to withdraw their money before the deadline ends. There's been a sharp decline in Bitcoin and Ripple prices on Zebpay in the past one month, and the recent statement from the company could lead to further decline. The company has denied the increase in price volatility. Zebpay said in a statement that it may not be able to honour people's request after the deadline if banks discontinue the services as directed by the Reserve Bank of India. The current decision could lead to confusion among over 30 lakh Zebpay users. Prices of the volatile bitcoin on Zebpay is Rs 4,22,550, which is well below Rs 6 lakh in the previous month.
As per a recent Reserve Bank of India action, banks have been told to discontinue banking services to those dealing with virtual currencies," said the online Bitcoin exchange, in a statement on its website, adding that though the matter is being challenged in the court, it is sub judice and that the exchange can't assure the safety of people's money if banks stop providing services.
"While our industry is challenging this legally, the outcome is beyond our control. Hence, if you are holding any rupees, or depositing any rupees in Zebpay, there could soon come a time when we may not be able to honour withdrawal requests. Please continue only if you understand this risk," said the company statement.
The digital currency exchanges have approached the Supreme Court to challenge the RBI circular issued on April 6, saying that it is against the interest of citizens. The company has said that if Zebpay bank accounts are disrupted, rupee deposits and withdrawals will become impossible. "This can cause discontinuation of crypto trade based on rupees, or at least cause significant price movements," said the company.
The company said that those who have invested their money in digital currencies can place a withdrawal request till the time the banks support such withdrawal. Mumbai-based Zebpay deals in cryptocurrencies like Bitcoin, Ethereum, Litecoin, Ripple and few other digital currencies.
In a circular on April 6, the central bank called for the ring-fencing of regulated financial entities such as banks from risks associated with virtual currencies. Heeding the RBI's warning, various banks in the country 'prohibited' customers from transacting in virtual currencies and gave these regulated entities three months to stop their business activities with the companies or individuals dealing in digital currencies. "If they (cryptocurrencies) grow beyond a critical size, they can endanger financial stability," BP Kanungo, RBI Deputy Governor, said in April.
Banks asked traders and online marketplaces to stop using their services for venture capital activities, following which they moved the Supreme Court against the RBI restriction. The hearing in the case is scheduled for July 20.