India Central Bank Clears Confusion Over Banking With Cryptocurrencies

Published: 28/05/2020 | Last Updated: 22/02/2022

India’s central bank recently clear the confusion with regards to banking with cryptocurrencies. The central bank confirms that commercial banks can provide banking services to companies and traders who are dealing with various cryptocurrencies.

The Reserve Bank of India confirms on Friday that there are no regulation that prohibits commercial banks in doing business with cryptocurrency traders. The statement was made in response to an inquiry by BV Harish, the co-founder of cryptocurrency exchange platform Unocoin.

What caused the confusion

Reports confirm that Harish filed an inquiry under the Right To Information Act on April 25. The CEO asks for clarification whether or not commercial banks can cater to traders and firms that use cryptocurrencies. The inquiry was made after a recent ruling of the Indian Supreme Court regarding cryptocurrencies.

The Supreme Court of India issued a landmark ruling on March 4 lifting the restriction that prohibits banks from providing services to cryptocurrency traders. The Royal Bank of India initially planned to issue a petition challenging the Supreme Court’s ruling claiming that cryptocurrencies may endanger India’s banking system.

The central bank decided not to push through with its petition. However, it also did not clear the confusion with regards to cryptocurrency trading and its underlying taxation issues. Because of this, both commercial banks and cryptocurrency traders are left confused.

Following the decision from the Supreme Court, cryptocurrency trading firms started to resume their operation. However, many commercial banks are still in limbo whether or not they are allowed to provide services to cryptocurrency traders especially since the central bank did not issue a circular or statement allowing them to do so.

Despite the massive confusion, the central bank still welcomes the inquiry from various cryptocurrency firms. The central bank adds that it is the duty of these firms to ask questions and clarifications in order to lift the cloud of confusion.

Now that the central bank has cleared the confusion, cryptocurrency trading firms are now free to do their banking transactions. Cryptocurrency trading has been growing quite steadily in the country as people are starting to transition into cashless transactions.

Crypto is booming in India

India is just one of the many countries that are transitioning into cashless payment transactions. As majority of the world is forced into lockdown due to the coronavirus pandemic, people are starting to flock online shopping platforms. With cryptocurrency, people can securely pay their bills and their shopping needs.

Aside from crypto transactions, trading has also seen a huge boost in India. Cryptocurrency exchanges in the country are reporting exponential growth in past couple of months despite of the pandemic.

CoinDCX, a cryptocurrency trading platform based in Mumbai, reported more than 150% growth in daily traffic just for the month of March. Market experts are expecting this to grow even further are more people are transitioning into online shopping.

The lucrative business of trading cryptocurrency is also seen to rise within the foreseeable future in India. With a largely untapped market, India has a huge potential to be the next haven of cryptocurrency.