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Some Indian Banks Still Refuse Crypto Transactions Despite Supreme Court Verdict

March 16, 2020

The verdict by the Indian Supreme Court is not being followed, as some banks in the country still do not approve cryptocurrency transactions.

Some Major Banks Decline Crypto Transactions

Earlier this month, the Supreme Court in India overturned the ban on cryptocurrency trading placed by the Reserve Bank of India (RBI). The verdict of the Supreme Court now makes cryptocurrency trading legal in the country, and banks can now support the crypto transactions.

However, despite the ruling of the Supreme Court, some major banks in the country still decline cryptocurrency transactions. According to some of the banks, they stated that they are still waiting for the RBI to give them directives regarding lifting the ban. For this reason, some of the banks are still refusing to reopen accounts for cryptocurrency businesses operating in India.

Mohammed Danish of Indian law firm Fintech Lawyers is seeking to rectify this situation so the country can move forward. He sent a letter to Finance Secretary Ajay Bhushan Pandey and two RBI officers addressing the continuous refusal by the banks to accept crypto transactions.

In his letter, he discussed the Supreme Court’s ruling and asking the banks to obey the directives. He stated in his letter that some instances have made it evident that some banks, such as IndusInd Bank and HDFC, are still refusing to process any transactions which involve the purchase or sale of crypto assets.

The lawyer argued that while the banks have not issued any written communication, they verbally told their customers that they are waiting for the RBI to notify them of this situation. According to Mohammed Danish, the bank’s refusal to operate cryptocurrency accounts is now illegal and unjust.

He stated that since the circular issued by the RBI is no longer in existence, the banks and other RBI regulated financial institutions must comply with the ruling of the Supreme Court. Therefore, the banks have to start offering banking services for the purchase and selling of cryptocurrency assets with no discrimination and with the same level of competence they provide to other legitimate transactions.

Danish stated that “It is pertinent to mention that the order of the Hon’ble Supreme Court has given no specific direction to RBI for issuing a separate notification to the banks for compliance of the said order.”

He concluded by urging the RBI to issue an official directive to all the banks in the country to reopen cryptocurrency bank accounts and to start approving crypto transactions once again.

Banks Still Await RBI’s Instructions

The Economic Times talked with some bankers regarding the ban on cryptocurrency transactions. Some of them stated that they would only open their channels for crypto trading only if there is a regulatory order from the country’s apex bank or the parliament because the legality of crypto transactions is still unclear in India.

An unnamed banker told The Economic Times that the directions from the RBI will give the banks the relevant guidance and clarity and that only then will they act accordingly. He also commented that banks are currently concerned about cryptos with regards to the use of money, security and traceability.

Sathvik Vishwanath, the chief executive of local crypto exchange Unocoin, noted that the RBI isn’t instructing banks to support the domestic cryptocurrency sector. Despite the verdict by the Supreme Court, the banks are not obligated to follow. A banking executive added that the banking system and its regulators are yet to work out a robust supervisory mechanism to govern digital currencies.