Banks Wary of Crypto Trades: A Step Towards Crypto Ban in India?

ICICI bank had informed payment gateways to shut off its e-banking services for merchants involved in cryptotrading.

Indian Cryptocurrency exchanges have alleged that payment gateways have blocked their crypto transactions on instructions from some of the country's nationalised banks.

(Photo: PTI)

Several Indian cryptocurrency exchanges have alleged that payment gateways have blocked their crypto transactions on instructions from some of the country's nationalised banks.

As per a report by Economic Times, ICICI bank had informed a few payment gateways to shut off its net banking services for merchants involved in trading of cryptocurrencies ie selling or buying.

Industry experts on condition of anonymity told The Quint that other large banks might follow the footsteps of ICICI Bank.

Why Are Banks Blocking Crypto Transactions?

In March 2020, the Supreme Court of India has set aside RBI’s circular and quashed the banking ban.

“However, there seems to be a confusion among the banking industry because they are not giving banking access to crypto industry in India despite the SC verdict. We request banks in India to update their compliance teams about the Supreme Court ruling that set aside the RBI circular against crypto,” Nischal Shetty, cofounder and CEO of Mumbai-based cryptocurrency exchange WazirX told The Quint.

While National Payment Corporation of India (NPCI) has refused to block fund movement for crypto trades, which is driven by SC’s ruling in 2020, WazirX crypto exchange had to remove the UPI option since banks are not providing UPI services to crypto exchanges.

Sathvik Vishwanath, cofounder and CEO of Unocoin, one of India’s oldest crypto exchanges, says that he was informed last week by ICICI Bank that his company’s account with the bank was being suspended. "This looks to me as a change in company's internal policies," he added.

Echoing his thoughts, Ashish Mehta, Co-Founder, DigitX told The Quint that there are no confirmed responses from ICICI about their reasons of doing this.

“As an industry participant we feel that this issue should be bilaterally resolved, or reasons for such an action should be made public in order to appease speculative panic, which with such an act, is setting among informed investors interested in this space.”

Ashish Mehta, Co-Founder, DigitX

Is This A Step Towards Crypto Ban in India?

The move of ICICI blocking transaction related to cryptocurrencies has come after a report published by Reuters on 14 March, which states that trading, mining and holding cryptocurrency could soon be illegal in India as the Indian government is proposing a new Bill that could ban all transactions related to cryptocurrencies.

According to a report by Reuters, the new Bill proposes to criminalise possession, issuance, mining, trading and transferring crypto-assets including Bitcoin, Dogecoin and other cryptocurrencies.

The report further suggests that if this becomes a law it’ll make India the first country to officially make holding cryptocurrency assets illegal.

The Quint reached out to Ashish Mehta, Co-Founder, DigitX, to understand whether this is a step towards crypto-ban in India.

Responding to the query, Mehta says, "We have always believed that the space of decentralised consensus should be adopted without any delay in order to foster the economic boom expected with Industry 4.0 transformation. We would not like our country to turn a blind eye to innovation and be decoupled from the global economy. "

Shetty believes that the crypto industry is employing tens of thousands of people directly and indirectly, and generating millions in tax revenue. “If we miss out on this opportunity, Indian exchanges will never be able to compete with our global counterparts," he adds.