Thursday, September 29, 2022

RBI Informally Urges Banks To Not Get Involved In Crypto-Related Transactions

Although in March 2020, the Supreme Court allowed the Indian banks to work with the cryptocurrency industry, the Reserve Bank of India is now, personally asking the lenders to separate themselves from exchanges and traders.

For quite a long time, India has been planning to bring in a law to ban cryptocurrencies and their trading in the country. But presently, the country is struggling with the COVID-19 crisis, therefore, it can’t be confirmed when the bill would get its clearance.

In 2018, the RBI restricted the banks from dealing in cryptocurrency-related transactions. Later, the RBI’s decision was challenged in the Supreme Court, by the Indian crypto exchanges. In March 2020, the Supreme Court revoked the ban and allowed its entities to extend their facilities to the exchanges and the traders. 

This year, the crypto market has experienced a boom in its value which attracted more Indians towards the industry. As per the reports, presently, there are over 10 million Indian crypto investors with holdings of more than $1.36 billion.  

A senior executive at one of the banks has recently said, “The regulator has been unofficially asking us that why are we dealing in such business when it is ultra speculative. A lot of money flows overseas via this trade which the RBI is not comfortable with as it may lead to money laundering.”

When RBI was asked to respond on this matter, it did not say anything.

Recently, ICICI bank also asked the payment companies, it has been working with, to stop providing their services to merchants dealing in cryptocurrency.

One of the sources at the bank has said that even though it was an informal discussion between the RBI and its entities, no one would disobey the central bank’s decision. 

The RBI has many doubts related to cryptocurrencies, on most occasions, the central bank has raised its concern. Just a few months ago, Shaktikanta Das, RBI Governor, clarified that from financial stability angle, they have some major concerns regarding cryptocurrencies.

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