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Indian Banks Hesitating to Embrace Crypto Industry Albeit RBI Consent

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The Reserve Bank of India (RBI) reversal of the outright crypto-currency ban in March was a gift to the flourishing Indian crypto-industry. The country’s emergence of new exchange platforms has been the incentive to the industry ‘s steady and healthy growth.

While India is one of the most affected nations by the coronavirus pandemic, this significant growth is noticeable. Indeed, the epidemic has led to a downward economic disaster across the nation. In such crisis-ridden times, blockchain and digital currencies have proved the desperately needed remedy for both investors and fintech ground-breakers alike.

Crypto regulatory wariness

Nevertheless, lifting the blanket ban seems was not the ultimate solution to the regulatory uncertainty that most had hoped to be. There have been alleged incidents where Indian banks have denied financial services to crypto-related firms. The good thing is that the industry has a more explicit regulatory structure than there was in 2017; the extent of cynicism and turmoil was sky-high.

Notably, a rumour emerged within the Indian Ministry of Finance for interdepartmental consultation on a law proposing all crypto operations to be abashed. The draft law proposal involved a heavy financial penalty for guilty individuals and a prolonged prison sentence. Recently, the rumour was refuted.

According to a business consultancy firm, AKM Global, if the proposal for a blanket ban passes into law in its current fashion, it would “completely decimate the crypto-industry in India.” Rumor has aroused the already fading fears in the crypto-currency industry in India. Regardless of the recent rumors, Nischal Shetty, CEO of WazirX, still maintains confidence with the government.

An email sent to Cointelegraph’s crypto media outlet quoted:

“On the day the news about the ‘note’ broke out, it created some panic among the community. But that’s all. We are not seeing any difference in the trading behaviour on WazirX since then. There have been speculations about crypto ban in the past as well. With more than 5 million crypto users in India, I’m confident that our Prime Minister won’t let us down.”

Indian Banks reluctance to embrace crypto industry

In addition to RBI, certain private commercial banks in India have refused to process cryptocurrency transactions. However, a large percentage of speculations suggest the reason why the cryptocurrency sector lacks knowledge; as noted within various government bodies.

Siddharth Sogani, the founder of Crebaco research firm, believes that there may be further conflicting interests at play. According to him, “Banks will always be globally opposed to this industry because if crypto comes into action; P2P transactions will eliminate the need for third-party bankers.”

Regardless, in response to a request for information from the co-founder of the crypto exchange Unocoin, Harish BV, the RBI did not, in fact, indicate any limitations on banks offering crypto-related companies and individual traders to account. This was the major RBI statement that presumably banks were waiting for, but the actual quantifiable effects remain.

CoinDCX CEO Pens Letter To India’s Finance Minister About Crypto; Reiterates The Fantastic Opportunities

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India’s tryst with cryptocurrencies has been ongoing for a long time now and the negative stance perpetuated in the country has also become a big issue. This has not stopped cryptocurrency organizations and proponents from clearing the air about the industry.

In a recent letter to the Financial Minister of India, the CEO of the cryptocurrency trading platform CoinDCX spoke about how the digital assets industry can become a major part of the country’s next Union budget. 

Sumit Gupta, the chief executive of CoinDCX urged FM Nirmala Sitharaman to keep an open mind about digital assets and look at it as an opportunity. Gupta added that the goal was to create a dynamic industry that would run parallel to the traditional economy. He reassured the minister that cryptocurrencies were not planning to usurp the position held by fiat currencies but rather complement it. In his words:

“India has been presented with the chance to be a part of a new wave of innovation, which is a tremendous opportunity to bolster the strength of our future economy. Just as the internet fundamentally altered the way we live and work, cryptocurrencies have the potential to change the way we participate in the global financial system.”

The CoinDCX official opined that at a time when other countries were receiving billions of dollars in fintech investments, India was barely scratching the surface. He took the example of Singapore, a burgeoning economy that received $53 billion just in the fintech industry. Looking at the numbers, India only received a mere 0.02 percent of Singapore’s total holdings.

In the letter, Gupta tried to convince Nirmala Sitharaman about the socio-economic advantages of crypto in India. He claimed that the agricultural sector in India can greatly benefit from microfinance portals and smart contract-based supply chains. The implementation of such models is expected to lead to greater traceability and convenience during transfers.

According to Gupta, the implementation of blockchain technology will result in greater collaboration between the public and private sectors. He reiterated that the opportunity presented by crypto should not be passed upon by a growing economy like India. The country is still in the midst of figuring out how to deal with digital assets, with the Supreme Court overseeing the proceedings.

Meanwhile, the Reserve Bank of India has directed all the banks to not deal with cryptocurrencies. The main reasons cited for this ban was that cryptocurrencies could be used for ‘terror financing’ and blatant money laundering. To counter this notion, the CoinDCX CEO suggested measures such as penal frameworks and KYC implementation across the fintech industry. The Finance Minister was told that clear guidelines were imperative for the industry to thrive, guidelines created on proper facts and information.

Nirmala Sitharaman has not responded to the letter yet but crypto proponents were anxious to see what her reply might be. At a time when tensions were high in the country, a public letter from a crypto personality is seen as a step in the right direction for the industry.