Reserve Bank of India informally asks banks to cut crypto ties

According to a report by news site Reuters last May 13, the Reserve Bank of India (RBI) has been informally asking banks to stop any transactions related to cryptocurrency accounts.

A senior executive from an Indian bank who wished to remain anonymous told Reuters that the regulator is unofficially asking them to stop dealing with cryptocurrencies due to risks of money laundering.

This resulted in banks advising crypto traders to sever any relations to cryptocurrencies to prevent their bank accounts from being shut down, as reported by crypto news site CoinDesk last May 15.

Various banks are heeding RBI’s pronouncements, with Axis Bank, Citibank and Kotak Mahindra Bank now limiting their connection with different crypto exchanges, as said in a report by Reuters last May 13.

Although there are still no formal regulations about cryptocurrencies in India, many crypto exchanges have been severely affected by the banks’ decision. WazirX, an Indian crypto exchange, has been experiencing problems with bank transfers since the first two weeks of May.

‘We have trouble with banks not allowing crypto exchanges with access to banking [application program interfaces] for receiving customer deposits’, WazirX Founder Nischal Shetty told CoinDesk. He added that the bank they used to work with has stopped serving them so they had to find another one.

The RBI has previously banned all banks from having any transactions with individuals that use Bitcoin (BTC) and other cryptocurrencies in 2018. They issued circulars for different banks as shown in a report by the daily newspaper Economic Times on March 9, 2020.

It led to multiple exchanges filing a petition against the RBI due to the decline of the country’s crypto trading volume. In response, the Supreme Court of India dismissed the stance of RBI and allowed banks to facilitate any crypto-related transactions in the same month.

However, the RBI is still pushing through with its anti-cryptocurrency movement to this day. Despite the increase of investors and the rising popularity of Bitcoin among the youth, the central bank remains wary of the volatile nature of cryptocurrencies.

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