Indian Banks Clamp Down on Crypto Transactions; Traders Lose Interest

Indian banks have been implementing bans on cryptocurrency exchanges in recent months. The State Bank of India (SBI), the country’s largest lender, has blocked crypto exchanges from receiving funds through its UPI platform. The bank has also requested payment processors to disable their UPI on their platforms.
SBI’s decision follows similar bans imposed by several other banks in recent months. In May, HDFC Bank cautioned investors against dealing with digital currencies, including bitcoin. The bank stated that failure to heed the advisory may result in card cancellations and transaction restrictions.
Traders are now resorting to e-wallet services to continue transacting on crypto trading platforms, but the fees associated with these wallets and the limitations on fund transfers have been deterring people.
The Reserve Bank of India (RBI) has been vocal about its concerns regarding digital currencies. Governor Shaktikanta Das recently stated that the central bank has expressed its “serious and major” concerns about crypto and its impact on financial stability to the government.
These comments come at an inconvenient time for crypto investors and enthusiasts, as the Union Cabinet is just weeks away from introducing a bill to regulate digital currencies and their nascent market in India.
Earlier, Finance Minister Nirmala Sitharaman stated that the government does not intend to clamp down too harshly on crypto and that interested investors will be given ample opportunities to experiment with digital currencies.
India currently has around 15 million investors holding crypto assets worth INR 150 billion. An increasing number of people are now seeking to enter this space, especially after the bitcoin price rally over the past year. There are currently around 350 Indian startups operating in the cryptocurrency and blockchain sectors.
Last month, former RBI deputy governor R. Gandhi suggested that cryptocurrencies should be treated as assets or commodities in India and that existing exchange laws should govern them. Gandhi stated, “Regulators should have access to information about individuals’ cryptocurrency holdings for tax purposes, and this information should be shared with exchanges.”
RBI Governor Shaktikanta Das also mentioned last month that the RBI has been working on a phased implementation strategy for a central bank digital currency (CBDC). He indicated that the pilot program could be launched by the end of this year, stating, “The Reserve Bank of India may launch its first digital currency trial programs by December,” in an interview with CNBC.
Furthermore, Infosys co-founder and Chairman Nandan Nilekani recently voiced support for cryptocurrencies in India and urged Indians to adopt them as an asset class. Nilekani stated in an interview with the Financial Times, “Just like you have some of your assets in gold or real estate, you can have some of your assets in crypto…I think there’s a role for crypto as a stored value but certainly not in a transactional sense.”