The Indian crypto industry’s woes with banks and regulations are set to continue, as Indian banks have started sending emails to users trying to deter them from dealing in cryptocurrencies. According to multiple tweets from users and reports online, HDFC Bank and the State Bank of India (SBI) have sent out letters to users, and at least one of these letters is misleading and tries to convince users that trading in crypto is actually illegal in India, which it is not. Crypto regulations in India are certainly unclear right now, but there is no regulation that says it’s illegal.
An email from HDFC Bank shared by creator Rinku Saini on Twitter, said, “We have observed that your account reflects probable virtual currency transactions, which aren’t permitted as per RBI guidelines.” The email further added, “To comply with the regulatory guidelines (RBI vide guidelines DBR.No.BP.BC.104 /08.13.102/2017-18 dated April 06, 2018), the Banks are advised to exercise due diligence by closely examining the transactions carried out in the account on an ongoing basis.”
What Is This @HDFC_Bank @HDFCBank_Cares 😒 @pushpendrakum @CryptooAdy @pankjtanwar @CryptoPointHi @cryptokanoon @CryptooIndia pic.twitter.com/rAK9guLGs7
— Rinku Saini (@RegaFlick) May 28, 2021
This is where things get murky. The email refers to an RBI order that was sent in 2018, and directed regulated financial institutions in India to stop doing business with any crypto related entity. However, the Supreme Court of India quashed this order in March last year, citing proportionality issues with it. While the SC doesn’t necessarily say that crypto trading is legal in India, there is no law that says it’s illegal. And according to Indian laws, things will be considered legal unless they are explicitly made illegal by law.
The letter from SBI is slightly better than HDFC’s. “Reserve Bank of India has repeatedly through its public notices cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies,” the SBI letter said. “RBI has not given any license/authorization to entities regulated by them to operate in cryptocurrency schemes or any form of virtual currencies such as Bitcoins,” the letter adds. Both letters were tweeted by Manoj Nagpal, a journalist at Outlook Asia.
HDFC Bank and SBI Credit Card issue advisory on not using their banking facilities for Cryptos (Bitcoins)
Say may suspend/restrict your bank account/credit card if you continue using it pic.twitter.com/PVGtOYG7vt
— Nagpal Manoj (@NagpalManoj) May 31, 2021
To be clear, the RBI did send an informal guidance to banks earlier this month, which led them to stop working with crypto firms. This led banks like ICICI, HDFC and others to withdraw services from crypto exchanges in India, which in turn have had to stop taking rupee deposits from users in the country.
Update: The Reserve Bank of India issued a circular later in the day, which also confirmed that its 2018 order is not enforceable now.