India’s commercial banks can indeed provide banking services to traders and firms dealing in cryptocurrencies

On May 22, the Reserve Bank of India (RBI) stated that as on date, no such prohibition exists, there was no prohibition regarding the lack of provision of banking services by Indian commercial banks to traders and firms dealing in cryptocurrencies.

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Indian banks are reluctant to work with cryptocurrencies firms, even though RBI made it clear

This is a statement from BV Harish, Co-founder of the cryptocurrency exchange Unocoin, under the Right to Information (RTI) Act. Moreover, on April 25, 2020, RTI was submitted to find out about the banks still being banned from providing services to cryptocurrency traders and service providers despite a recent ruling by the Supreme Court to the contrary.

On March 4, India’s Supreme Court quashed a Reserve Bank of India (RBI) order dating back to April 2018, which restricted banks from providing services to entities dealing with cryptocurrencies.

The RBI originally planned to submit a petition to consider the challenge of the Supreme Court’s ruling, because it announced that trading in virtual currencies would put the country’s banking system at risk. In the end, the central bank did not file a lawsuit. However, it did not clarify the atmosphere of cryptocurrency and tax transactions. As a result, both the bank and the cryptocurrency industry were left in some confusion.

Ashish Singhal, CEO of the cryptocurrency exchange CoinSwitch.co stated:

“Since the Supreme Court’s decision, many crypto companies have started resuming their operations by opening up banking channels. However, many banks are still in a dilemma whether to offer their services to crypto companies or individuals since there has been no circular from the RBI ordering the lifting of the ban.”

Meanwhile, Nischal Shetty, founder, and CEO of Mumbai-based cryptocurrency exchange WazirX stated:

“While the Supreme Court ruling had made it very clear that there are no curbs on banking for crypto businesses, the RBI reply to the RTI filing is very much welcome. There has been confusion amongst many banks despite the Supreme Court ruling because these banks have been waiting for information from RBI.”

However, exchanges seem to be confident that RBI clarification will accelerate the growth of the cryptocurrency space in India. Hopefully, this reaction can clear up confusion for banks and bring clarity to the cryptocurrency community in India, which has been showing consistent growth since March.

Shetty said:

“I expect all banks to start servicing crypto businesses without any restrictions. This marks yet another positive way forward for the crypto ecosystem in India.”

Several exchanges have reported substantial growth in volume over the past two months. Sumit Gupta, a cryptocurrency trading platform and liquidity aggregator, saw 150% growth of daily active users in just March.

While some cryptocurrency businesses have difficulty accessing bank support, CoinDCX and many other cryptocurrency businesses have no difficulty accessing traditional financial fields.

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