Home / Money / Personal-finance /  RBI window ends in 2 days: Have you exited crypto holdings yet?

In April this year, the Reserve Bank of India (RBI), through a circular, gave a window of three months to banks and other RBI-regulated entities to wind up existing relationships with firms or individuals dealing in cryptocurrencies. RBI deputy governor B.P. Kanungo had said that virtual currencies can “adversely impact market integrity and capital control. And if they grow beyond a size, they can endanger financial stability as well". This came after several warnings to investors from both the RBI as well as the government.

The three-month window will come to an end on 5 July. We spoke to experts to understand the way forward, particularly for investors.

What is the legal position?

Even before the RBI prohibited its regulated entities from facilitating trading in virtual currency, finance minister Arun Jaitley, in his budget speech, had said that the government does not consider cryptocurrencies as legal tender. However, cryptocurrencies like Bitcoin have not been banned altogether.

In fact, a committee headed by Subhash Chandra Garg, secretary, department of economic affairs of Ministry of Finance was set up in December to make recommendations to regulate them. Legal experts too said that there is nothing that indicates a complete ban on cryptocurrency.

The crypto-community in the country saw a ray of hope in Garg’s statement. In an interview to a TV channel recently, Garg said that the committee he is heading has prepared a draft, which hasn’t been made public, on regulating crypto currency and something might be firmed up in July. The committee, among other things, discussed “what should be reserved and what not. Lot of detailed work has happened and now we should be in a position to wrap this up in the first fortnight of July," he said.

It is being seen as an indication that there will not be a blanket ban on cryptocurrencies after all. Shivam Thakral, chief executive officer of BuyUcoin, a crypto exchange, said that they won’t mind a few days’ hiatus in cryptocurrency trading if there is regulation on the other side.

Battling in court

The crypto exchanges are also battling against the RBI circular in courts. Multiple petitions were filed by exchanges, individuals and industry bodies in different high courts. All of these are now being heard in the Supreme Court and the next hearings are slated for 3 July and 20 July.

Our position in the writ petition is that the RBI circular should be set aside being unconstitutional at various levels, said Anirudh Rastogi, managing partner at TRA Law, a law firm that is representing four exchanges in the courts. “A business cannot survive without access to the formal economy. Such denial is a violation of the petitioners’ fundamental right to trade and equality before law. If the objective is to prevent money laundering and other illicit activities, more proportionate means can be adopted that stop short of shutting down the business itself. Crypto exchanges can be subjected to AML (anti-money laundering and KYC (know your customer) guidelines, reporting obligations and monitoring just as these apply to other financial services," he said.

Moreover, crypto exchanges have made a representation to the central bank, highlighting things like how the concerns can be addressed and how other jurisdictions are dealing with these issues, Rastogi said.

What happens next?

While banks will stop their services to the crypto-exchanges, the exchanges have prepared to continue crypto-to-crypto transactions. This means that investors will not be able to buy or sell crypto assets in exchange of rupees through these exchanges. The exchanges will only allow them to trade one crypto currency with another.

“Effectively the platforms will remain active and crypto assets of users will continue to remain on the exchanges, while all the cash deposits will be sent back to the consumers," said Vishal Gupta, co-founder, Digital Assets and Blockchain Foundation of India.

The large transactions that were happening through banking system will now stop but micro transactions could still happen in cash. “Exchanges will themselves not do this, but this will turn in to a peer-to-peer system," Gupta said.

“The transactions have not stopped, they have just gone in the unregulated and informal space. We had pointed out at the time of the RBI announcement as well. Now, they won’t have any information of the transactions happening," said Praveenkumar Vijayakumar, chairman and CEO, Belfrics, a crypto exchange.

A founder of a crypto exchange said, on the condition of anonymity, that there are several WhatsApp and Telegram groups that are facilitating these peer-to-peer trades and the activity in these groups is increasing. There are also websites like that connect buyers and sellers directly, who can settle the payment among themselves, without involving an exchange.

What should you do

Sathvik Vishwanath, co-founder and chief executive officer of crypto exchange Unocoin, said there has been a significant fall in the number of new customers joining the crypto exchange for trading as well as the volume of trade. “We are informing our customers that whoever needs to withdraw their rupee deposits, should do it before the deadline. Right now, the relationships have not stopped but yes the fact that the deadline is a few days away is in sight," he said.

Exchanges are sending mails to their customers guiding them through the process of withdrawal. “We are making sure that we communicate to them that we ourselves will be hand-cuffed after 5 July as far as rupee withdrawals are concerned," Thakral said.

With just a few days left to exit, you need to calculate the risk that you are facing and decide accordingly. The exchanges will not be able to help you liquidate your crypto assets after 5 July, unless there is a change in law which is unlikely anytime soon. In such a situation, Mint Money advises new investors to stay away from crypto investments.

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