RBI tells lenders to re-consider ties with crypto exchanges, traders

  • Reuters
  • Stock Market News
RBI tells lenders to re-consider ties with crypto exchanges, traders
Credit: © Reuters.

By Nupur Anand

MUMBAI, May 13 (Reuters) - India's central bank is informally urging lenders to cut ties with cryptocurrency exchanges and traders as the highly speculative market booms, despite a Supreme Court ruling that banks can work with the industry, three sources told Reuters

The guidance comes as India is crafting a law to ban cryptocurrencies and penalize anyone dealing in them, which would be among the most sweeping crackdowns on the new investing fad in the world. But with the COVID-19 crisis engulfing the country, no one is sure when such a bill may be passed, adding to investors' confusion. Reserve Bank of India (RBI) in 2018 had forbidden banks from dealing in all transactions related to bitcoin and other such assets. That diktat was challenged by the crypto exchanges and in March 2020, India's top court overturned the RBI ban and allowed lenders to extend banking facilities to them.

With investors continuing to rush into the hot new asset class, however, regulators appear to be gearing up for another try.

Thousands of new users are piling into the system every day at a time when the prices of major digital currencies have been on the rise. There are over 10 million crypto investors in India with total holdings of over 100 billion rupees ($1.36 billion), according to industry estimates. No official data is available.

"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," said a senior executive at one of the banks which was contacted.

RBI did not respond to a request for comment.

Private lender ICICI Bank (NS: ICBK ) has already asked payment service companies that it works with to stop all crypto-related payment transactions, three sources said, while other lenders are also following suit.

ICICI Bank did not respond to an email seeking comment.

None of the sources wanted to be identified as the discussions with RBI were private and no official order has been issued yet.

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

The central bank has often voiced its apprehension about digital currencies. Earlier this year, RBI Governor Shaktikanta Das said that they have "major concerns (around crypto) from the financial stability angle." CRYPTO CONUNDRUM

With Indian banks increasingly wary of dealing with them, crypto exchanges are scrambling to find new business partners.

Axis Bank (NS: AXBK ), Citibank, Kotak Mahindra Bank (NS: KTKM ) and others are limiting their exposure to the cryptocurrency market, sources said.

"Axis Bank has taken a fairly negative stance against crypto. They are citing internal policy and risk measures and have stopped transactions with crypto exchanges," said the CEO of a global crypto exchange with presence in India.

IndusInd Bank (NS: INBK ) is also in the process of stopping all crypto-related transasaction, said two sources.

Axis, Kotak and IndusInd did not reply to an email seeking comment while Citibank declined to comment.

($1 = 73.6050 Indian rupees)

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or

100
  • Sunaina Anand @Sunaina Anand
    Until and unless there no regulation or any authorisation at least retail should stay away from the cryptocurrency because at the end it is retail investor get the huge losses, even lost his wealth just by the one information have no grounds of facts and ultimately the stock market called as gamble
    Like 0
  • debasis jena @debasis jena
    Ban cryptocurrency in India
    Like 0
  • Debasis Dash @Debasis Dash
    As a cryptocurrency investor, I must say, that the RBI needs to bring in effective law to regulate Cryptocurrency exchanges and Markets in India. Trading is fine. But, as a Natsec professional, I wouldn't like the cryptocurrency to enter retail market.
    Like 4
  • Shahajada Mulla @Shahajada Mulla
    allow margin to trade in fno & in intraday for stop the cryptocurrency.
    Like 6
  • mohit nkm @mohit nkm
    Risk is everywhere and its personal choice afterall to take it or not. So this is all bushit
    Like 20
  • Mhachamo Kithan @Mhachamo Kithan
    So that means stock market is not speculative? Why Options and futures are allowed on NSE then? Everyday people are going bankrupt in Day trading, options and futures trading...If there is a ban on crypto, then even day trading, margin trading, Futures & options, Shorting should all be banned in our Stock exchange also...
    Like 29
    • debasis jena @debasis jena
      Ban cryptocurrency in India
      Like 0
    • Rudraksh Kak @Rudraksh Kak
      @Mehul Sidhpura I beg to differ and pitty your stance. Do you know what KYC is and if not please do not comment. There is a full verification done for amounts above a certain limit and yes Crypto's are traceable unless you are doing it through foreign exchanges via VPN scrub at kraken or binance.
      Like 2
    • Rudraksh Kak @Rudraksh Kak
      @Mehul Sidhpura Coming to the point of trail; You can track Crypto on a kyc account the same way that you can track a western union money transfer or a Mutual Fund or to explain it better to your smart brain via FRM limit tags on your PAN card
      Like 3
    • Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100
  • Hari Chemmangadu @Hari Chemmangadu
    please ban crypto currencies
    Like 3
    • Rudraksh Kak @Rudraksh Kak
      @Hari Chemmangadu Just because you are not aware of the correct channel to make money does not mean that something should be banned
      Like 10
    • Rudraksh Kak @Rudraksh Kak
      Like 0
    • Titan Motors @Titan Motors
      If you are a good trader then always welcome cryptocurrency or any other asset to trade $$ No matching items found Send Feedback
      Like 1
    • Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

      Error: File type not supported

      Drop an image here or

      100
  • Hari Chemmangadu @Hari Chemmangadu
    please ban crypto currencies
    Like 3

Related Articles