According to reports, Indian banks have been slow to accept the Supreme Court’s decision allowing them to do business with cryptocurrency firms.
According to a report in the Economic Times, Kotak, India’s leading private bank, has become the first to open its doors to the crypto community.
The banking behemoth announced a partnership with the leading cryptocurrency exchange WazirX, allowing traders to use banking services to liquidate their funds. Given that Indian banks have frozen crypto payments and withdrawals for the past eight months, the collaboration between the two parties is being viewed as a major breakthrough for the crypto community.
“WazirX has opened an account with Kotak which can be used to receive and pay money to investors trading on the exchange. The account is yet to become operational. Paperwork, KYC, and some testing are on,” said one of the people familiar with the matter.
Private banks in India have refused to do business with crypto platforms, citing a lack of regulatory clarity, and have frequently been caught using non-valid Reserve Bank of India (RBI) circulars to deny services.
WazirX and Kotak did not respond to Cointelegraph’s request for comment right away.
The RBI circular in question was issued in 2018, when the Indian Central Bank directed banks to refrain from providing their services. The circular was later disqualified by the Supreme Court in March 2020, allowing banks to resume operations. However, it had little to no effect on bank behaviour.
Ramesh Kailasam, CEO of the industry lobby IndiaTech.org, explained why banks are still refusing to provide their services despite the Supreme Court ruling:
“Post RBI clarifying to banks in May this year that they cannot cite the 2018 order as it was set aside by the Supreme Court, banks were free to engage with the cryptocurrency ecosystem. Since then banks have been permitted to engage provided they undertake necessary due diligence processes around KYC, AML, CFT, PMLA, FEMA, besides looking at their own financial health and risk exposures. Hence banks who have done this homework would typically be free to engage with the industry.”
The most recent collaboration between one of the leading Indian crypto exchanges WazirX and popular banking giant Kotak also suggests that positive crypto regulations are in the works. During the ongoing winter parliamentary session, the Indian government intends to discuss the cryptocurrency bill. According to industry sources, the government is considering regulating digital assets as an asset class rather than imposing a blanket ban.