Banks caution customers against dealing in cryptocurrencies

• Follow

Leading Indian banks have sent notices to their customers for using their bank accounts for crypto transactions. The emails have been sent warning customers of curtailing banking services including the closure of their accounts.

After March 2020, this is the first time that banks have sent written notices to their customers for cryptocurrency transactions. The banks have been quoting the 2018 RBI circular pointing out that they have not yet received any official communication from RBI post that.

“With the Bill pending in Parliament, the government has been trying to bring legislation. It itself is debated whether there should be a blanket ban or should some window be given, as currently there is no law prohibiting trading in cryptocurrencies. Till our regulatory framework comes out there will always be uncertainty around cryptocurrencies,” said Ajay Shaw, Partner at DSK Legal.

A large number of people took to social media complaining about notices received quoting the Supreme Court judgement in March 2020.  The email sent out to customers read “To comply with the regulatory guidelines (RBI vide guidelines DBR.No.BP.BC.104 /08.13.102/2017-18 dated April 06, 2018), the Banks are advised to exercise due diligence by closely examining the transactions carried out in the account on an ongoing basis.”

SBI Card also sent notices stating. “Please note, usage of credit card for transactions on virtual currency merchant platforms may lead to suspension/cancellation of your SBI Credit Card in terms of the Cardholder Agreement.”

Shaw added that while Supreme Court has struck down the 2018 RBI circular it has not legitimised cryptocurrencies in India.

Regulatory Conundrum

On April 6, 2018, directed that all entities regulated by it shall not deal in virtual currencies or provide services for facilitating in dealing with or settling the cryptocurrencies. Hence, all the banks that were already providing such services were told to exit the relationship within three months with the cryptocurrency trading platforms.

On 4th March 2020, the Supreme Court set aside the RBI circular, which was issued on April 6, 2018, lifting curbs on cryptocurrency trading in India. After the Supreme Court order, several exchanges started offering crypto services again and in no time it has again emerged as a popular alternative investment avenue. But recently all banks have stopped their API services to crypto exchange, as a result, exchanges have again been denied banking services. There has been no notification from RBI after the Supreme Court ruling in 2020.