Despite the fact that there is no formal prohibition, a few Indian institutions are unwilling to serve the crypto business and have taken issues into their own hands in order to deal with them in their own way. IDFC First Bank is the most recent firm to join the bandwagon, according to reports.
IDFC First Bank Ltd, a private sector issuer, is the newest to stop assistance to the cryptocurrency industry, which has seen some normalcy in banking services since the Reserve Bank of India (RBI) clarified last month that the 2018 circular directing lenders to stop dealing in virtual currencies because they were not valid anymore. According to industry insiders, IDFC First Bank temporarily halted services during the last week.
“IDFC Bank joins a few of the other nationalized banks that have taken the stance to not service cryptocurrency-based companies. While RBI has clarified its stance that the banks can provide services after their due diligence, it is abruptly insane for these banks to take their foot back. These kinds of reactions also alarm the investors of cryptocurrencies for the wrong reason,” stated Sathvik Vishwanath, co-founder and chief executive officer, Unocoin.
IDFC First Bank isn’t the only one who avoids the market’s turbulence. Since May, ICICI Bank, Yes Bank, and Paytm Payments Bank have all made identical choices. HDFC Bank and State Bank of India (SBI) have both issued warnings to their customers about the dangers of trading in unregulated digital currencies like Bitcoin. The banks’ choices are made behind closed doors, with almost no transparency. In India, there is no formal prohibition on cryptocurrencies, as the Reserve Bank of India has acknowledged.
“The root cause of the problem is the unregulated tag of the crypto industry in India. Since the industry is unregulated, it creates confusion among the services providers as there are no set guidelines. We need to address the larger policy issues to unlock the true potential of digital asset economy in India,” said Shivam Thakral, CEO, BuyUcoin. Cryptocurrencies are a source of concern for banks since they are frequently used for money laundering, illicit purchasing, and contraband activities. While the RBI’s explanation brought solace to crypto investors, banks are trapped in the middle, as they can neither fully embrace crypto nor claim complete exemption from its potential ramifications.
All whilst, the Internet and Mobile Association of India (IAMAI), has established a board to oversee the implementation of a self-regulatory code of conduct for its members, which states that all crypto exchange members will voluntarily comply with anti-money laundering (AML) or combating the financing of terrorism (CFT) and know your customer (KYC) and other laws in India.
The board and exchanges will create standards to accommodate frequent audits and inspections, a consumer redress mechanism, and fraud prevention once the system is formalized. They say that by working together, crypto exchanges would be able to keep an eye on money laundering, illicit transactions, and other issues.