Indian banks are reportedly citing a three-year old quashed circular to persuade users against crypto
- Some banks are citing a 2018 order from India’s Central Bank, which banned
cryptotrading, and was quashed by the Supreme Court last year.
- HDFC Bank and State Bank of India are two banks that have reached out to users about crypto investments.
- India’s banks started withdrawing services from crypto exchanges earlier this month.
“We have observed that your account reflects probable virtual currency transactions, which aren’t permitted as per RBI guidelines,” said an email from HDFC Bank to Rinku Saini, a content creator, and crypto investor. In this email, the bank is citing a 2018 order from India’s central bank that banned crypto trading
“To comply with the regulatory guidelines (RBI vide guidelines DBR.No.BP.BC.104 /08.13.102/2017-18 dated April 06, 2018), the banks are advised to exercise due diligence by closely examining the transactions carried out in the account on an ongoing basis,” the email added.
What Is This @HDFC_Bank @HDFCBank_Cares @pushpendrakum @CryptooAdy @pankjtanwar @CryptoPointHi @cryptokanoon… https://t.co/dAaiVlbu1b— Rinku Saini (@RegaFlick) 1622201348000
Interestingly, the RBI order that was sent in 2018 was quashed by India’s Supreme Court in March last year. The order had asked regulated financial institutions to stop doing business with crypto exchanges and companies. But in its judgement, the Supreme Court cited the lack of “proportionality” in the RBI’s ruling against crypto firms. While the apex court has overturned the ban on crypto trading, RBI has not issued a formal order on this issue.
However, earlier this month, the central bank had reportedly sent an informal guidance to financial institutions, asking them to steer clear of crypto exchanges and companies. This led banks to withdraw services from these companies, forcing crypto exchanges in India to stop accepting rupee deposits from their users. ICICI Bank, YES Bank, Paytm Payments Bank are some of the leading financial institutions that have cut ties with the crypto world in India.
Day 934Top Banks refusing to work with Crypto startups in IndiaWe, the people of crypto, request @RBI to interv… https://t.co/fIEE3TGymw— Nischal (WazirX) ⚡️ (@NischalShetty) 1621742603000
“Day 934. Top banks refusing to work with crypto startups in India. We, the people of crypto, request RBI to intervene & help this industry,” tweeted Nishal Shetty, founder of India’s top exchange, WazirX, on May 23. WazirX is owned by the global
Banks caution crypto users
HDFC Bank and SBI Credit Card issue advisory on not using their banking facilities for Cryptos (Bitcoins)Say may… https://t.co/d1D2vMcsFb— Nagpal Manoj (@NagpalManoj) 1622429706000
Manoj Nagpal, who works at Outlook Asia Capital, tweeted both the letters. “Reserve Bank of India has repeatedly through its public notices cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies,” the SBI letter said. “RBI has not given any license/authorization to entities regulated by them to operate in cryptocurrency schemes or any form of virtual currencies such as Bitcoins,” the letter adds.
“I received an email threatening withdrawal of banking services because I purchased some crypto. Email cites 2018 RBI guidelines which were quashed by the Supreme Court last year. Given crypto being deliberated by law makers, is this not harassment?” tweeted another user.
@HDFC_Bank I received an email threatening withdrawal of banking services because I purchased some crypto. Email ci… https://t.co/wiX3vtn9zF— Sanat Mehrotra (@sanatmehrotra) 1622201228000
That said, the false claims made by the banks seem to be having an impact on some users’ decisions too. “Move with caution in crypto. I became silent on crypto because of such things..We still don’t have a clear picture yet from the RBI. One of my friends got this message from HDFC Bank,” tweeted one user.
Interestingly, HDFC Bank had recently put out a note, which predicted that cryptocurrencies could develop as a potential asset class. In a report titled “Cryptocurrencies: Fad or Forever?”, the bank’s treasury research team noted that it’s only a matter of time before Indian investors have legal access to cryptocurrencies. The treasure research team is led by the bank’s chief economist, Abheek Barua, according to a report by Mint.
The Indian government is still in the process of formulating a bill on cryptocurrencies. And the recent informal guidance from the central bank has caused a bump in the growth trajectory for these companies. Crypto investors in India have been growing fast over the past half a year. In fact, WazirX reported that it crossed $2 billion in trading volumes in February this year. The two most popular cryptocurrencies in the world — Bitcoin and Ethereum — rose to all-time high before witnessing a market correction earlier this month.
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