India’s RBI claims no restrictions were imposed on banks for working with crypto businesses

The RBI’s response follows several complaints that some banks were refusing to offer banking services to crypto exchanges and related businesses

The Reserve Bank of India (RBI) has clarified that it doesn’t prohibit banks and other financial services providers in the country from dealing with, or providing, bank account services to cryptocurrency exchanges.

India’s central bank offered the clarification as a response regarding a right to information (RTI) filing submitted by a crypto user. The RTI was in reference to the RBI’s orders to banks in the country 2018, which banned the country’s financial services providers from dealing with exchanges and related businesses.

The orders were quashed by the country’s Supreme Court in a ruling that lifted the central bank’s directive after several exchanges petitioned the court.

The response follows a request by Harish BV, the co-founder of local crypto platform Unocoin.

BV had filed the RTI on April 25, asking whether “RBI prohibited any banks from providing [the] bank accounts to crypto exchanges or crypto traders.”

The banking regulator replied that no such prohibition was in place (as of the request’s filing and the bank’s response).

RBI’s crypto ban affected crypto businesses

The RBI’s directive to banks prohibiting any dealings between the institutions and crypto entities threatened to collapse India’s cryptocurrency ecosystem.

With restrictions hitting hard on exchanges and individuals, businesses started to fold as banks closed accounts or warned they would be suspended if the respective holders did not cease their crypto dealings.

Coinome and Koinex both declared they were closing shop in May and June 2019 respectively, while many have struggled on through a cash crunch and low volumes.

The Supreme Court’s verdict to lift the ban came as a big relief to crypto exchanges and users. However, a lack of communication from the RBI saw most banks reluctant to deal with crypto businesses.

But Harish BV told the Economic Times of India:

“Bankers have been saying that they need new RBI circulars mentioning that there are no more restrictions for them to provide bank accounts for crypto businesses. Now, we have received a positive response from the RBI.”

The Unocoin co-founder has also noted that the response from the RBI combined with the Supreme Court’s lifting of the ban could see increased adoption of blockchain and cryptocurrency in India. According to him, the clarification opens up crypto to India’s 1.35 billion-strong population.

India’s largest cryptocurrency platform said, after raising $2.5 million from Polychain Capital and Coinbase Ventures, that it will use some of the funds to drive crypto adoption and bring over 50 million new customers to the sector.