Confusion in Indian banking industry jeopardises crypto operation

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A year after the Supreme Court declared the 2018 cryptocurrency prohibition of the Reserve Bank of India (RBI) unconstitutional, the country’s major banks still deny services to Indian cryptocurrency exchanges, causing confusion in the banking industry.

On May 4, the co-founder and CEO of Mumbai-based crypto exchange Wazir posted on Twitter that many local banks use the RBI’s 2018 decision to refuse them financial services, despite the settlement of the issue.

‘Confusion in India’s banking industry is hurting 1.5 CRORE Indians in Crypto. The Honourable Supreme Court of India has set aside the RBI crypto circular of 2018. Banks in India still cite that circular to deny banking,’ he said.

Economic Times reported on May 2 that the ICICI Bank has been avoiding transactions related to crypto exchanges. It also restricted payment gateway operators from providing net banking services to merchants involved in crypto trading beginning April 29.

Furthermore, Unocoin co-founder and CEO Sathvik Vishwanath said that the ICICI Bank suspended the company’s account despite being one of the oldest crypto exchanges in India.

As the ICICI Bank is one of the big lenders to crypto exchanges, many fear that other banks may follow suit in suspending services to crypto companies.

‘I request banks in India to update their compliance teams about the Supreme Court ruling that set aside the RBI circular against Crypto. It’s not fair that the crypto industry has a clear go-ahead from the Supreme Court of India and yet banks deny banking to the industry,’ Shetty appealed on Twitter.

Amidst the confusion between the Supreme Court and the RBI, crypto companies remain hopeful that the government will establish favourable regulations for cryptocurrency.

Before the Parliament’s annual budget session, the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 synopsis provided the following:

‘To create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India. The bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.’

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