India's central bank is urging lenders to cut ties with cryptocurrency exchanges and traders, report says

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India's central bank is urging lenders to cut ties with cryptocurrency exchanges and traders, report says
The Indian government is aiming to ban cryptocurrencies.S3studio/Getty Images
  • India's central bank has informally asked lenders to stop dealing with cryptocurrency exchanges and traders, Reuters reported Thursday.
  • The country is working on creating a law to ban cryptocurrencies even after a Supreme Court ruling allowed banks to engage in transactions.
  • The Reserve Bank of India is concerned that crypto dealings may lead to money laundering, a source told Reuters.

India's central bank is informally urging lenders to cut ties with cryptocurrency exchanges and traders even after the country's Supreme Court has ruled that banks can work with the industry, Reuters reported Thursday.

The move comes as the Indian government is working on creating a law to ban cryptocurrencies and penalize people who deal with them. Still, investors have been rushing into the booming asset class, with industry estimates putting total holdings at more than 100 billion rupees ($1.36 billion) by more than 10 million investors, the report said.

An unnamed senior executive at one of the banks contacted by the regulator said it was unofficially asked why it was dealing in an ultra-speculative business.

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"A lot of money flows overseas via this trade which the RBI is not comfortable with as it may lead to money laundering," the bank executive said, according to the report with cited three sources.

The country's top court in March 2020 overturned the RBI's 2018 ban on banks from dealing in transactions related to bitcoin and other such assets. The court rendered its ruling following a challenge by crypto exchanges.

"Even though the discussions are informal that is enough. No one wants to go against the regulator," another source told Reuters.

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