India's central bank – the Reserve Bank of India (RBI), is informally urging lenders & other banks to break the ties with cryptocurrency exchanges & traders. There isn't any idea as to when this highly speculative market will boost. However, the Supreme Court had passed a ruling that banks can operate with the crypto industries.
The guidance comes as India is creating a regulation to ban cryptocurrencies & penalize those dealing in them, which would be among the most extensive crackdowns on the novel investing fad in the world. But with the pandemic crisis engulfing the nation, no one is sure when such a law may be passed, adding to investor's confusion.
In 2018, the RBI had prohibited banks from dealing in all transactions related to bitcoin & other crypto assets. However, the crypto community in India challenged this order & in March 2020, India's top court canceled the RBI ban, permitting lenders to extend banking facilities to them. However, with investors continuing to speed up into the hot novel asset class, regulators appear to be fastening things up for another try.
Thousands of novel users are stacking into the system each day at a time when the rates of vital digital currencies have been on the rise. There are over 10Mn crypto investors in India with total holdings of around Rs 100Bn ($1.36 billion), as per the industry evaluations. No official information is available. A senior executive from one of the banks stated that the regulator has been unofficially seeking us about why they are dealing in such business when it's ultra-speculative. A lot of cash flows overseas through this trade that the RBI is not comfortable with, leading to money laundering.
RBI didn't respond to the comment request. Private lender - ICIC Bank has already sought payment service firms that it operates with to ban all crypto-related payment transactions, while other lenders are also following the suit. ICIC bank has refused to respond to an email asking for comment. None of the sources wanted to be found out as the discussions with RBI were private & no official bill has been issued yet.
A source said, "Even though the discussions are informal, that is enough. No one wants to go against the lawmaker". The central bank has often voiced its anxiety about digital currencies. This year, RBI Governor - Shaktikanta Das stated that they have crucial concerns around crypto from the financial stability angle.
The Crypto Quandary
With Indian Banks significantly wary of dealing with them, crypto exchanges are shuffling to find novel business traders. Sources quoted Citibank, Kotak Mahindra Bank, Axis Bank & others are regulating their exposure to the cryptocurrency market. The CEO of a global crypto exchange with a presence in India said that Axis Bank has taken a reasonably opposing viewpoint against crypto. They are mentioning internal risk & policy measures & have ceased transactions with crypto exchanges.
IndusInd Bank is also in the process of ceasing all crypto-related transactions. IndusInd, Axis & Kotak did not respond to an email seeking comment, while Citibank refused to comment.
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