HDFC Bank and SBI Cards warn customers about cryptocurrency deals


HDFC Bank and SBI Cards emailed their customers last week warning them of the risks of trading cryptocurrencies. While HDFC Bank has directed customers to disclose the nature of their transactions with crypto exchanges, SBI Cards has warned its customers not to use their credit cards to deposit funds for crypto trading purposes.

While the HDFC Bank sent e-mails to certain customers stating their account numbers, SBI Cards issued a general notice to their customers. MediaNama saw a copy of both emails.

In the past few months, private banks have revoked deposit and payment services on the country's cryptocurrency exchanges. While there is much speculation about the reasons for this move, bankers and industry executives have said that the Reserve Bank of India (RBI) has informally stated that they are happy with the level of crypto trading activity in the country. In January of this year, the government informed parliament that it would introduce a new law banning cryptocurrency trading, mining and investment in the country, while also giving RBI the powers it needs to start working on a digital currency start.

However, since the announcement, the government appears to have watered down its previous stance. The Treasury Secretary said the proposed bill would take a "calibrated approach" and would give investors a moratorium period to clear their crypto holdings. Additionally, the government has changed the company's disclosure rules that classify cryptocurrency holdings as digital assets.

The disclosures apply to promoters, companies and corporations that perform a fiduciary function, i.e. buy cryptocurrencies on behalf of end customers. It was also clarified that crypto transactions would be taxable under the Income Tax Act and the Goods and Services Tax Scheme. Even Nandan Nilekani has publicly stated that he supports the regulation of cryptocurrencies as financial assets. It was recently reported that the government is also planning to set up a new committee to investigate the effectiveness of cryptocurrency regulation in the country.

SBI Cards issues a warning

In its email to customers, SBI Cards said that RBI had repeatedly warned customers about the risks of trading virtual currencies. It states that RBI has not given any of the companies it regulates to operate in cryptocurrency systems or any form of virtual currency such as bitcoins. The email also stated that credit card services would be blocked for all customers who use their card on a cryptocurrency exchange or merchant platform.

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HDFC Bank cites 2018 RBI circular

In its email to customers, HDFC Bank said that customers must go to the nearest branch within 30 days to clarify the nature of certain transactions on crypto exchanges. "We have found that your account is likely to reflect virtual currency transactions that are not allowed under RBI guidelines," it said. If the customer does not clarify the nature of his transactions on crypto exchanges within the next 30 days, HDFC Bank says that it will restrict account transactions without further notice.

Thank you Wazirx for giving me the opportunity to trade crypto. I had visited the hdfc bank today according to their latest email via Crpto. You asked me to come back to the email that I am not dealing with crypto any further, a sad scenario. @WazirXindia @NischalShetty

- Mayank Nimbalkar (@mayanknimbalkar) May 31, 2021

Interestingly, the bank cited RBI's April 2018 circular banning banks from doing business with individuals or companies that trade virtual currencies. But that circular was rejected by the Supreme Court last year on the grounds of proportionality.

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Crypto Regulations Are Inevitable: HDFC Bank

In a May 27 report by HDFC Bank's finance department, the bank stated that there are 10 million cryptocurrency holders in India with $ 1.36 billion. “The frantic sell-off of cryptocurrencies recently reminded market participants of its still uncertain status with regard to general acceptance and regulatory concerns. A significant drop in cryptocurrencies over the past week has raised concerns about their potential as mainstream investments, ”the report said. The bank analyzed the returns on leading cryptocurrencies and compared them to returns from investments in the S&P and NASDAQ indexes, as well as gold. While the returns on Bitcoin were 36%, the returns on the S&P index have been 17% since the beginning of 2021, the bank said.

“Like most conventional investors, we still have to reconcile the often contradicting properties of cryptocurrencies. Yes, they help hedge against strong moves in other asset classes, but their own volatility, which seems to be mainly driven by temporary bouts of intense interest (e.g. damper. However, as central banks step into the crypto game, key features like the limited Legacy crypto supply, this is an area that needs to be watched closely. We think it is only a matter of time before Indian investors have legal access to crypto games. "- - HDFC bank

MediaNama has produced a guide to cryptocurrency regulations in India, which outlines the position of the government over the past few years and various policy recommendations. Read it here: A Complete Review of Cryptocurrency Regulation in India.

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