India’s central bank is doubling down on its anti-digital currency stance. According to sources in India, the apex bank is warning commercial banks against servicing digital currency-related businesses, including exchanges and traders as well. This is despite a ruling by the Supreme Court of India that overturned this decision in 2020.
The Reserve Bank of India is not a big fan of digital currencies, and it has made this crystal clear over the years. While it has reduced its outright animosity against the industry in the recent past—mostly because it lost a legal fight against the industry last year—it’s still working to stamp out digital currencies in India.
A Reuters report revealed that the RBI has been sending warnings to commercial banks in India against serving digital currency-related businesses. Citing sources who wished to remain anonymous, the outlet revealed that the RBI is concerned about the capital outflow overseas and the money laundering risks.
One of the sources, who’s a senior executive at a bank that the RBI contacted, commented,
“The regulator has been unofficially asking us that why are we dealing in such business when it is ultra-speculative. A lot of money flows overseas via this trade which the RBI is not comfortable with as it may lead to money laundering.”
Most banks are heeding the informal warning. While some banks have nothing against digital currencies, they know better than to go against the regulator, another source commented.
“Even though the discussions are informal that is enough. No one wants to go against the regulator,”he stated.
Already, some of the banks have started taking actions against digital currency customers. ICICI Bank, a popular private lender in India, is one of those acting on the warning. Sources claim it has already started asking the payment service providers it works with to stop all digital currency-related payment transactions.
Other banks are following suit. Axis Bank, Kotak Mahindra Bank and Citibank have all taken measures to reduce their exposure to digital currencies.
The CEO of a global digital currency exchange which has a presence in India commented,
“Axis Bank has taken a fairly negative stance against crypto. They are citing internal policy and risk measures and have stopped transactions with crypto exchanges.”
Despite the continuous anti-Bitcoin stance by Indian regulators, the industry has continued to soar in the Asian country. According to unofficial figures, over ten million Indians have invested in digital currencies. The total holding is said to be over 100 billion rupees (US$1.36 billion).