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NEW DELHI: Private sector IDFC First Bank Ltd is the latest lender to shut down services to the cryptocurrency industry, which experienced some normalcy in access to banking services after the Reserve Bank of India (RBI) clarified last month that the 2018 circular ordering lenders to stop trading in virtual currencies was no longer valid.
According to industry sources, IDFC First Bank shut down services over the past week as it is conducting enhanced due diligence on banking support for crypto exchanges.
The email sent to IDFC First Bank requesting comment went unanswered until time of publication.
IDFC Bank joins some of the other nationalized banks that have taken the position of not serving cryptocurrency-based businesses. While RBI has clarified its position that banks can provide services after due diligence, it suddenly makes no sense for these banks to regain a foothold. These kinds of reactions also alarm cryptocurrency investors for the wrong reason, ”said Sathvik Vishwanath, co-founder and CEO of Unocoin.
According to industry estimates, there are over 15 million crypto investors in India, holding 10,000 crore of digital assets.
Lenders, including ICICI Bank, Yes Bank, and Paytm Payments Bank, have already severed ties with the crypto industry.
HDFC Bank and State Bank of India have also cautioned their customers against transactions in virtual currencies such as Bitcoin. This prompted the RBI to issue a clarification regarding its 2018 circular.
RBI had previously unofficially told lenders to stay away from companies dealing with cryptocurrencies, although there has been no official communication in this regard.
According to industry sources, while there are still a few banks that have reservations to offer services to the crypto industry, it is now less aggressive in terms of negative measures compared to a few weeks ago.
The root cause of the problem is the unregulated label of the crypto industry in India. Since the industry is unregulated, this creates confusion among service providers as there are no defined guidelines. We need to tackle the broader political issues to unlock the true potential of India’s digital asset economy, ”said Shivam Thakral, CEO of BuyUcoin.
Meanwhile, in order to better comply with Indian laws, the industry body, Internet and Mobile Association of India (IAMAI), has established a council to oversee the implementation of a code of conduct for ‘self-regulation for its members which states that all crypto members of the exchange will voluntarily comply with anti-money laundering (AML) or anti-terrorist financing (CFT) and will know your customers and other laws on companies and taxation.
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