July 2, 2022
  • July 2, 2022

Cryptocurrency investors stranded as banks block transactions

By on May 13, 2021 0

Cryptocurrency exchanges and investors face a new challenge with most banks unwilling to process such transactions.

Sources said the problem started to arise in late February and in recent weeks some banks have ordered payment gateways not to process cryptocurrency-related transactions.

Advertisements from cryptocurrency exchanges during the Indian Premier League as well as booming trading volumes are seen as cause for concern, even though the Supreme Court lifted the ban on them in March 2020.

In recent weeks, some cryptocurrency exchanges have faced transaction processing issues even as many investors have complained that they cannot invest as cryptocurrency prices are on the rise.

“Most banks don’t work with cryptocurrency exchanges and investors because the Reserve Bank of India has unofficially indicated that it shouldn’t be working with them,” said a person familiar with the development.

An email request to the RBI by Activity area on the question did not elicit any response.

Banking access

“There seems to be confusion within the banking industry as they do not provide access to the crypto industry in India despite the Supreme Court verdict. We ask Indian banks to update their compliance teams on the Supreme Court ruling that overturned the RBI circular against crypto, ”said Nischal Shetty, CEO and founder of WazirX, noting that NPCI refused to block the movement of funds for crypto transactions.

However, WazirX removed the UPI option because banks do not provide UPI to crypto exchanges, Shetty said. However, not all exchanges appear to be affected.

According to Sathvik Vishwanath, co-founder of the cryptocurrency exchange Unocoin, the problem arose because some banks decided not to allow their payment gateways to process these transactions.

“There were always banks, which never processed transactions related to cryptocurrency. Some banks have changed their position now which creates the problem, ”he said, adding that Unocoin has not faced such a problem.

Ashish Mehta, co-founder of Digital Techlab Private Limited (DigitX), said his exchange has not encountered any banking issues, but those issues are scaring investors of an alternative asset class to crypto.

“This is a banking issue due to a lack of understanding and could be at the entity level or a momentary pause as they attempt to introduce regulations for more transparency for the KYC or the fight against money laundering, ”Mehta said.

Regulatory uncertainties

Sources in cryptocurrency exchanges, as well as banks, point out that there continues to be regulatory uncertainty, which is causing much of the problem.

“While the Supreme Court lifted the ban a long time ago, but the Ministry of Finance and the Reserve Bank of India have not been in favor of private cryptocurrencies. This has led to a lot of confusion even though trading volumes and investor interest have increased, ”said one player.

Even before that, most lenders were wary of the processing of cryptocurrency-related transactions.