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Last year, the Indian Supreme Court overturned the Reserve Bank of India’s (RBI) circular banning banks from proving services to entities engages in crypto-related activities. However, recent reports suggest that the monetary authority has not yet totally given up on its intention to distance the country’s financial institutions from the digital assets market.
While the SC has overturned the central bank’s circular, RBI has reportedly informally urged banks to cut ties with crypto traders and exchanges, according to Bitcoin.com. At the moment, some banks are planning to stop offering their services to entities engaged in crypto-related businesses while others have already limited their exposure to the crypto market.
“The regulator has been unofficially asking us why are we dealing in such business when it is ultra speculative,” an unnamed senior bank executive told Reuters. “A lot of money flows overseas via this trade which the RBI is not comfortable with as it may lead to money laundering.”
Some banks have already responded to RBI’s call. “ICICI Bank has already asked payment service companies that it works with to stop all crypto-related payment transactions,” three unnamed sources told Reuters, adding that “other lenders are also following suit.”
The sources added that Indusind Bank is in the process of halting all crypto-related transactions. Meanwhile, Axis Bank, Kotak Mahindra Bank, Citibank, and others have limited their exposure to such transactions.
“Axis Bank has taken a fairly negative stance against crypto,” a CEO of one of the country’s crypto exchanges said. “They are citing internal policy and risk measures and have stopped transactions with crypto exchanges.”
While the supposed RBI request is unofficial, none of the country’s financial institutions under its supervision wants to offend the monetary authority. “Even though the discussions are informal that is enough,” a source said. “No one wants to go against the regulator.”
Rumors that the Indian government might impose a ban on crypto trading continue to swirl around since last year. Despite this uncertainly, the country’s crypto industry has been booming.
Crypto exchanges in the country have reported a massive spike in new account openings this year. For instance, WazirX revealed that there were more sign-ups during the first six days of April compared to the first six months of 2020.
Various international players have already made their moves to enter the Indian market. Coinbase recently appointed former Google exec Pankaj Gupta as the side lead and vice president for its India operations while Revolut also announced its expansion plans into the country.
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