Indian Banks Still Cryptophobic Despite No Banking Prohibition

In a recent response to a Right to Information query, the Reserve Bank of India, the Indian central bank, has stated that there is no prohibition on banks to provide bank accounts to cryptocurrency traders.

Some banks have been arbitrarily denying services to crypto users and are still doing so.

If there is no law banning crypto trading, as emphasized by India's Supreme Court, and there is no prohibition on banks by the RBI, then why aren't banks treating crypto-related activities on par with other legitimate activities?

The RBI banking ban on crypto was set aside by the Supreme Court on March 4, 2020.

In its detailed judgement of over 180 pages, the Supreme Court stated that the RBI action is extremely disproportionate in severing the lifeline for cryptocurrency trading business despite crypto trading not being illegal under any Indian law and no harm or damage is proved to have been caused to these banks as a result of their relationship with crypto exchanges.

In contrast, some banks are indeed providing services to crypto exchanges, although sometimes with a withdrawal restriction.

Considering the RBI's recent response to the Right to Information query stating simply that there is no prohibition on banks as well as the fact that banks are expecting updates from the RBI, one thing is clear: The RBI is not particularly interested in breaking the current state of confusion.

The denial of services by banks for crypto users is absolutely without any statutory backing or regulatory guideline, which is a blatant violation of the principle of nondiscrimination.

When nullifying the ban, the Supreme Court emphasized that there is no law prohibiting cryptocurrency trading and additionally recognized banking services as a lifeline to crypto business activity.

The recent RBI response to the Right to Information query further highlights that there is no prohibition on banks to provide services to crypto traders.