India, Pakistan Order Banks to Cut Crypto Ties

As the price of highly volatile digital coins continue to fall this year on fears of heightened government regulation around the world, more bad news came late Friday as the Reserve Bank of India (RBI) issued an order indicating that all entities under its regulation would have three months to cut ties with any service dealing cryptocurrency. The State Bank of Pakistan (SBP) issued similar restrictions on its banks and financial services. (See also: Bitcoin Will Become World’s ‘Single Currency’: Dorsey.)

The RBI’s statement, which is directed at financial institutions including the nation’s banks, could present a major roadblock for citizens in the world’s second-most-populous country who are hoping to get into cryptocurrency trading. While the entity indicated that “virtual currencies have the potential to improve the efficiency and inclusiveness of the financial system,” RBI noted that they “raise concerns of consumer protection, market integrity and money laundering, among others.”

Regulation Prompts Major Sell-Off 

The SBP statement clarified that cryptocurrencies are “not legal tender, issued or guaranteed by the Government of Pakistan,” and that “SBP has not authorized or licensed any individual or entity for the issuance, sale, purchase, exchange or investment in any such Virtual Currencies/Coins/Tokens in Pakistan.”

Both countries have seen considerable damage from last year’s cryptocurrency frenzy. For example, OneCoin, a fraudulent Ponzi scheme that was promoted as a crypto coin with a private blockchain, affected many Indian citizens. While Indian authorities stopped short of a completely ban on cryptocurrency trading, the new rule follows a series of restrictions on trading and fundraising for the centralized currency around the world in countries such as South Korea, China and the U.S. 

The price of bitcoin, the world’s largest cryptocurrency by market capitalization, dropped below $6,600 on the news. At a price tag of $6,759.32 per coin on Monday at 3:46 UTC, bitcoin reflects a 66% decline from all-time highs reached near $20,000 in December. On Friday, bitcoin prices denominated in Indian rupees fell by 27%, trading at a significant discount to Coindesk’s price index, according to data from CryptoCompare. (See also: Bitcoin Is ‘Worthless’: London’s Capital Economics.)

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