Indian banks continue to resist crypto a week before legislation hits Parliament

As the Indian government is due to introduce crypto legislation for discussion in the Parliament next week, Indian banks are cautioning customers against investing in crypto.

Fast facts

• According to a report by the Economic Times, HDFC, Axis and ICICI banks have sent emails to customers warning them about the risks of investing in crypto over the past two-three weeks. Bankers are worried that the aggressive advertising campaigns by crypto exchanges that some consider to be misleading do not adequately convey the risks of investment and may lure investors in.

• During a parliamentary meeting as well as a meeting chaired by the prime minister on the future of crypto, crypto ads and their potential impact were heavily discussed. Under the circumstances, WazirX and Bitbns have temporarily halted all crypto ads. According to a report last week, the expected crypto legislation may not allow crypto businesses to explicitly solicit customers.

• The Reserve Bank of India, the country’s central bank — which has consistently called for a ban on all crypto — has also asked banks to be careful and steer clear of crypto businesses, the ET report said. This is not the first time that banks, under the pressure of the RBI, have been trying to cut ties with crypto. In May, HDFC Bank and State Bank of India’s Card and Payment services sent emails to customers citing a defunct 2018 RBI notice imposing a de-facto ban on crypto and asked for clarifications for crypto-related transactions. The emails threatened customers with account suspension or closures if they failed to offer justification for crypto transactions. The emails were later withdrawn since the RBI circular was struck down by the apex court last year. In the same month, ICICI Bank had pulled support for crypto transactions. In September, State Bank of India blocked payments to crypto exchanges.

• While crypto exchanges continue to deal with banking challenges, they are hopeful of a positive legislation that would lay down clear banking rules. India’s crypto bill is expected to be up for discussion in the winter session of Parliament starting on Nov 29. The latest reports suggest that though crypto may be banned for payments, they may be allowed to be traded like assets.