This comes just days after ET reported that
was distancing itself from bitcoin and other cryptocurrencies. ICICI Bank had told some payment gateway operators last Thursday to shut off its net banking services for merchants involved in buying or selling cryptocurrencies, either directly or indirectly.
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On Tuesday, Nischal Shetty, the chief executive of cryptocurrency exchange Wazirx, took to Twitter to express concern over banks refusing crypto transactions.
They were citing a 2018 RBI ban on banks dealing in crypto, which the Supreme Court had struck down in 2020, he said.
Day 915Confusion in India’s banking industry is hurting 1.5 CRORE Indians in Crypto.The Honourable Supreme Cour… https://t.co/OUzdWlevzW
— Nischal (WazirX) ⚡️ (@NischalShetty) 1620102711000
A top executive of another crypto platform, who did not wish to be named, also said banks had told payment gateways to block such transactions despite the top court’s directive.
“I request banks in India to update their compliance teams about the Supreme Court ruling that set aside the RBI circular against crypto,” Shetty wrote on Twitter. “It’s not fair that the crypto industry has a clear go-ahead from the Supreme Court of India and yet banks deny banking to the industry.”
According to crypto executives who pleaded anonymity, ICICI Bank was among the last few big lenders providing services to crypto exchanges. However, it had discontinued the current accounts of these businesses two weeks ago, they said. Other large banks are expected to follow suit, they added. RBI and ICICI Bank did not respond to ET’s queries.
It is unclear why banks have started placing the latest round of restrictions.
A senior executive of a large payment gateway company said one possible reason could be to protect investors amid heightened investment activity by retail investors in penny tokens and increased advertising activity by the crypto industry, which could lead more users to the unregulated sector.
Suspending partnerships is a possible mechanism by a bank’s risk and compliance team to minimise transactions, he added.
“We want the government to step in to build frameworks for these exchanges, and for trading in cryptocurrency,” said Vishwas Patel, executive director, Infibeam Avenues (which operates the payment gateway CCAvenue), who confirmed to ET a few days ago that the company had been receiving strict instructions “from leading banks to not provide PG services to any merchants who are dealing in cryptocurrencies or exchanges.”
If banking partners continue to bar payment gateways from crypto-related transactions, India’s crypto exchanges could see their businesses dry up.
“We are using backups, but it could get stalled if this continues,” said the CEO of a crypto exchange.
A few days ago, a small payment gateway had discontinued transactions on the platform on ICICI Bank’s directive, he said.
“The best way for a bank to restrict crypto transactions is to make sure that exchanges don’t get to collect money from the payment aggregators. So, that is what is being done,” he explained.
Though Unocoin does not use payment getaways that are dependent on ICICI Bank, the private sector lender informed a few weeks ago that it was suspending the company’s account, said cofounder and CEO, Sathvik Vishwanath.
“We didn’t anticipate ICICI Bank would do this,” Vishwanath said. “We are concerned about the culture it creates. If everyone starts doing it because one bank did, it will become a problem.”