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HDFC Bank and SBI Cards warn customers about crypto-currency trades

HDFC Bank and SBI Cards sent emails to their customers, last week, warning them about the risks of trading in crypto-currencies. While HDFC Bank has instructed customers to disclose the nature of their transactions with crypto-exchanges, SBI Cards has warned its customers that they should not use their credit cards to deposit funds for crypto-trading purposes.

While HDFC Bank sent emails to specific clients, citing their account numbers, SBI Cards issued a general notice to its customers. MediaNama has seen a copy of both emails.

In the last few months, private banks have been revoking deposit and payments services to crypto-currency exchanges in the country. While speculation is rife as to the reasons for this move, bankers and industry executives have said that the Reserve Bank of India (RBI) has informally said that they are comfortable with the level of crypto-trading activity in the country. In January this year, the government informed Parliament that it would introduce a new piece of legislation that would ban crypto-currency trading, mining and investments in the country while providing the RBI with the requisite powers to begin work on a digital currency.

However, since the announcement, the government seems to have watered down its earlier stance. The Finance Minister said that the proposed legislation would adopt a ‘calibrated approach‘ and that investors would be given a moratorium period to square off their crypto-holdings. Further, the government has made amendments to the company disclosure rules classifying crypto-currency holdings as digital assets.

The disclosures apply to promoters, companies and entities that perform a fiduciary role, that is they purchase crypto-currencies on behalf of end-customers. It also clarified that crypto-transactions would be taxable under the Income Tax Act and the Goods and Services Tax regime. Even, Nandan Nilekani has stated publicly that he supports regulating crypto-currencies as financial assets. It was recently reported that the government is also looking to create a new committee to examine the efficacy of regulating crypto-currencies in the country.

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SBI Cards issues warning

In its email to customers, SBI Cards said that the RBI has repeatedly warned customers about the risks of dealing and trading in virtual currencies. It said that the RBI has not granted any license or authorisation to entities regulated by them to operate in crypto-currency schemes or any form of virtual currencies like Bitcoins. The email also said that it would block credit card services to any customers that use their card on a crypto-currency exchange or merchant platform.

HDFC Bank cites RBI’s 2018 circular

In its email to customers, HDFC Bank said that customers need to visit their nearest branch within 30 days to clarify the nature of certain transactions to crypto-exchanges. “We have observed that your account reflects probably Virtual Currency transactions which are not permitted as per RBI guidelines,” it said. If the customer does not clarify the nature of their transactions to crypto-exchanges within the next 30 days, HDFC Bank says that it will restrict account transactions without further notice.

Interestingly, the bank cited the RBI’s April 2018 circular which barred banks from dealing with any individual or business dealing in virtual currencies. But this circular was struck down last year by the Supreme Court on the grounds of proportionality.

Crypto regulations are inevitable: HDFC Bank

In a May 27 report by HDFC Bank’s treasury department, the bank said there are 10 million crypto-currency holders in India with $1.36 billion. “Cryptocurrencies’ frenzied sell-off recently reminded market participants of its still uncertain status over broader acceptability and regulatory concerns. A substantial fall in cryptocurrencies last week raised concerns about their potential as mainstream investments,” the report said. The bank analysed the returns of leading crypto-currencies and compared them with returns on investments in the S&P and NASDAQ index, and Gold. While the returns in Bitcoin stood at 36%, since the start of 2021, returns on the S&P index stood at 17%, the bank said.

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“Like most conventional investors, we are yet to reconcile the often-conflicting properties of cryptocurrencies. Yes, they help to hedge against sharp movements in other asset classes but its own volatility that seems to be driven primarily by transient bouts of intense interest (the number of Google searches for instance or a tweet from a major investor) is a bit of a dampener. However with Central Banks stepping into the Crypto game, essential properties like limited supply of legacy Cryptos, this is a space that needs to be watched closely. We think it is just a matter of time before Indian investors have legal access to Crypto plays” HDFC Bank


MediaNama has prepared a guide on crypto-currency regulations in India, listing the government’s position over the last few years and various policy recommendations; read it here: A complete low-down on crypto-currency regulation in India

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