Thursday, October 6, 2022

IDFC First Bank Halts Offering Services To Crypto Industry

A group of Indian banks are still hesitant to offer their services to the crypto industry, therefore, they have decided to take make the decisions regarding it by themselves, even though there is no official ban announced. 

IDFC First Bank is the latest financial institution in India to join the bandwagon by halting the services offered to the companies involved in the crypto-related activities, reported an Indian news outlet Livemint. 

As per the report published by Livemint, for the past one week, IDFC First Bak has been not providing its services to the crypto companies. It is said to be a temporary ban till the bank explores ‘enhanced due diligence’ regarding banking support to crypto exchanges.

Apart from IDFC First Bank, other banks including ICICI Bank, Yes Bank and Paytm Payments Bank have been maintaining their distance from the volatile market.

As per the report, HDFC Bank and the State Bank of India (SBI) have also warned their customers against the risk involved in dealing with cryptocurrencies.

Such moves by the banks have created confusion among the customers, as they are left in the middle of nowhere. 

It is to be noted that RBI from its side has cleared that there is no official ban on cryptocurrency in India. A month ago, the central bank of India issued a notification clarifying that the financial institutions in India should not use RBI’s April 2018 order of banning banks from getting involved in crypto-related activities.

In March 2020, the Supreme Court of India revoked that order, which means the directive has no longer been true, now. However, it has become tricky for the regulated financial players in India to decide the end outcome of dealing in cryptocurrency, as it remains to be an unregulated asset.

Since its inception, cryptocurrency has been a big concern for banks, as many individuals or institutions use it as an instrument for money laundering, illegal purchases and transaction relating to contraband. 

After RBI’s clarification, many investors were relieved, as they could deal in the virtual currencies, but the banks are still stuck in the middle because they could neither support the cryptocurrency, entirely, nor claim absolute immunity. 

Crypto Exchanges Self-Regulating

Presently, the Indian Government is not able to decide whether it should regulate the cryptocurrency or not, however, the crypto exchanges took the matter into their hand and have agreed to self-regulation under the patronage of the Internet and Mobile Association of India (IAMAI). 

The crypto exchanges’ self-regulation includes a code of conduct that examines whether the members voluntarily comply with the KYC, tax and other norms.

According to the reports, the crypto exchanges have also announced to set up a second lobby under the leadership of IndiaTech. Zebpay, one of the renowned crypto exchanges of India, has already confirmed its membership in the second lobby.

It has been further reported that the board and exchanges will develop protocols to accommodate regular audits and inspections, customer redressal mechanism and fraud protection. They also have claimed that their collective efforts will allow the crypto exchanges to monitor illegal activities.

As per an estimated data, around 15 million people in India have invested more than $100 billion in cryptocurrency. It is a lot of money to stake in an industry that has zero regulation.

Although the Indian government is concerned about cryptocurrency and activities related to it, the authorities welcome the underlying technology of blockchain in the country. 

According to a report, recently, 15 private and state-run banks in India have come together and formed a new group called Indian Banks’ Blockchain Infrastructure Company Private Limited (IBBIC). Initially, they have planned to use blockchain technology to process Letters of Credit (LCs), GST invoices and e-way bills, this way they could accelerate the existing system.

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