Recently, the Reserve Bank of India issued a warning stating that investors and holders of Bitcoin in India should consider the potential risks involved with it before investing in it as it is yet to be regulated by the Indian government and cryptocurrency exchanges within the local market.
The official statement by the RBI states that Reserve Bank of India on December 24, 2013, [warned] users, holders and traders of Virtual Currencies (VCs) including Bitcoins concerning the potential economic, financial, operational, legal, customer protection and security related risks linked in dealing with such VCs. Vide press release dated February 1, 2017, RBI has also clarified that it has not given any license/ authorization to any entity/company to operate such schemes or deal with Bitcoin or any VC.
Not only the Central Bank in India not happy with Bitcoin but also China, Russia to name a few. At a financial forum held in Shanghai lately, Deputy governor Pan Gongsheng of People’s Bank of China (PBoC), Chinese central bank, stated that in the long-term, bitcoin’s value would decline and so would be the investment or adoption. “That day is not far when bitcoins will be treated as a dead body floating away in front of you,” said Gongsheng.
However, the vivid prediction given away by the deputy governor of the Chinese central bank failed to create an impact on the investors, and neither did the warning of the RBI, the craze for bitcoin has grown exponentially over the past few months. Even after the public imposition of the cryptocurrency exchange ban by the Chinese government, central bank, and financial authorities, in the whole country couldn’t bottleneck the price of bitcoin which has increased from $5,000 to $13,600, peaking at $16,753 earlier today, on December 12th, 2017.
In an interview, Vivek Steve Francis, CEO of Codinome, a cryptocurrency exchange told that if RBI wanted to ban cryptocurrencies and restrict bitcoin usage in the country, the Indian government would already have made it clear done that by now. Because excessive regulation and an obvious ban on cryptocurrency transactions would send bitcoin trading to uncontrolled over-the-counter (OTC) markets, the government has been unwilling to do so as it will provide unnecessary strict statutes on cryptocurrency exchange and the bitcoin market in India.
Francis further added that “If India were to ban virtual currencies, they would have done that already. For the last three years, the RBI is saying one thing only and that’s: They are uncomfortable with it, and people should invest at their own risk“.
It has become increasingly challenging for governments to either ban or heavily restricts bitcoin usage because of the rapid growth of the cryptocurrency market at an alarming rate. The fast increase in demand, for all sort of fiat currencies, and has led to the high expectation that the traders will trek to open markets upon the pressure of a cryptocurrency trading ban.
A similar incident has transpired in China, in which traders have migrated to overseas markets such as Hong Kong with offshore accounts to make transactions on cryptocurrencies. As such OKCoin, BTCC and Huobi, formerly three of the largest cryptocurrency exchanges in China, have revamped their brand to BTCC.com, Huobi Pro, and OKEx, to provide OTC services in Hong Kong.
As a non-federal currency and peer-to-peer protocol, Bitcoin eradicates the necessity of mediators such as banks, and most importantly, separates money from the state’s control. Bitcoin reduces the importance of central banks and asks the question if there is a need for the continuation of government-issued currencies?
Despite the extensive choice of bitcoin as a strong store of value and safe haven asset by general consumers, investors, major financial institutions, institutional investors, investment banks, and businesses, in the long-term, central banks will likely continue to reassert their opposition against bitcoin, given that it possesses a severe threat to their authority.