As uncertainty continues regarding India’s position on digital assets, the country’s central bank is informally advising banks to cease engaging with cryptocurrency exchanges.
The Reserve Bank of India is reportedly bothered with the overseas inflow of money into exchanges with rising concerns on the possibility of money laundering, sources close to the matter have told Reuters.
“The regulator has been unofficially asking us that why we are dealing in such business when it is ultra speculative. A lot of money flows overseas via this trade which the RBI is not comfortable with as it may lead to money laundering,” the sources said.
The sources who maintained anonymity stated that no official statement has been issued regarding the matter, although some banks are already implementing the directive.
Banks taking a negative approach from crypto transactions
The sources indicate that CICI Bank, a private lender, has directed partner payment service companies to stop all crypto-related payment transactions.
Other banks including Axis Bank, Citibank, and Kotak Mahindra Bank have also distanced themselves from crypto transactions citing internal policy changes.
The informal regulation fuels India’s momentum towards outlawing digital currencies in the country. Currently, India is drafting a bill that will potentially ban cryptocurrencies. The bill’s progress is on hold due to the ongoing coronavirus crisis in the country.
In 2018, the RBI had banned regulated banks from processing transactions involving bitcoin and other digital assets. However, the Supreme Court overturned the directive after crypto exchanges appealed in March 2020.
India’s impending cryptocurrency ban comes as the sector continues to witness a high inflow of capital, with investors aiming to profit from the ongoing rally. Estimates indicate that India’s crypto investors stand at 10 million, with total holdings valued at an estimated $1.36 billion.