The RBI’s response follows multiple 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 is not prohibiting banks and other financial service providers in the country from processing transactions or providing bank accounts to crypto exchanges.
The central bank issued this clarification in response to a Right to Information (RTI) request filed by a crypto user. The RTI referred to RBI orders issued in 2018 that had barred financial service providers from dealing with exchanges and related crypto businesses.
Those orders were later overturned by the country’s Supreme Court in a ruling that lifted the central bank’s directive after several exchanges challenged it in court.
The response came following a request from Harish BV, co-founder of local crypto platform Unocoin.
BV had filed the RTI on April 25, asking whether “the RBI prohibited banks from providing bank accounts to crypto exchanges or crypto traders.”
The banking regulator replied that no such prohibition existed (at the time the request was filed and at the time of the RBI’s response).
RBI’s crypto ban disrupted crypto businesses
The RBI’s directive that barred banks from transacting with crypto entities threatened to destabilize India’s crypto ecosystem.
With restrictions hitting exchanges and individual users hard, many companies began shutting down as banks closed accounts or warned that accounts would be suspended if holders continued crypto-related transactions.
Coinome and Koinex both announced plans to cease operations in May and June 2019 respectively, and many others faced liquidity crunches and sharply reduced trading volumes.
The Supreme Court’s decision to lift the ban brought significant relief to exchanges and crypto users. However, due to limited communication from the RBI, many banks remained hesitant to engage with crypto companies.
Harish BV told the Economic Times of India that:
“Bankers said they needed new RBI circulars stating that there are no longer restrictions on them providing bank accounts to crypto businesses. Now we have received a positive response from the RBI.”
The Unocoin co-founder also noted that the RBI’s clarification, combined with the Supreme Court’s lifting of the ban, could accelerate blockchain and crypto adoption in India. He said the clarification opens crypto to the country’s population of roughly 1.35 billion people.
The largest crypto platform in India said that after raising $2.5 million from Polychain Capital and Coinbase Ventures, it will use part of the funds to promote crypto adoption and bring more than 50 million new customers into the sector.