Reconsider ties with crypto exchanges, RBI tells lenders

Mumbai, May 13

The RBI is informally urging lenders to cut ties with cryptocurrency exchanges and traders as the highly speculative market booms, despite a Supreme Court ruling that banks can work with the industry, three sources said.

The guidance comes as India is crafting a law to ban cryptocurrencies and penalise anyone dealing in them, which would be among the most sweeping crackdowns on the new investing fad in the world.

The guidance comes as India is crafting a law to ban cryptocurrencies and penalise anyone dealing in them, which would be among the most sweeping crackdowns on the new investing fad in the world. But with the Covid crisis engulfing the country, no one is sure when such a Bill may be passed, adding to investors’ confusion.

The RBI in 2018 had forbidden banks from dealing in all transactions related to bitcoin and other such assets. That diktat was challenged by the crypto exchanges and in March 2020, the Supreme Court overturned the RBI ban and allowed lenders to extend banking facilities to them. With investors continuing to rush into the hot new asset class, however, regulators appear to be gearing up for another try.

Thousands of new users are piling into the system every day at a time when the prices of major digital currencies have been on the rise. There are over 10 million crypto investors in India with total holdings of over 100 billion rupees ($1.36 billion), according to industry estimates. No official data is available. — Reuters