Clipped from: https://economictimes.indiatimes.com/news/economy/finance/lack-of-clarity-icici-shuts-out-crypto-trades/articleshow/82337734.cms?utm_source=ETTopNews&utm_medium=HPTN&utm_campaign=AL1&utm_content=23
Synopsis–India’s largest private sector lender ICICI Bank is distancing itself from Bitcoin and other cryptocurrencies amid conflicting signals from the Supreme Court and Reserve Bank of India (RBI).
India’s largest private sector lender ICICI Bank is distancing itself from Bitcoin and other cryptocurrencies amid conflicting signals from the Supreme Court and Reserve Bank of India (RBI). On Thursday, the bank told some of the payment gateway operators to shut off ICICI net banking for merchants who are involved in buying or selling Bitcoins directly or indirectly. With this, ICICI Bank’s online services cannot be used to deal with cryptocurrency exchanges and other entities which may be facilitating crypto trades.
“In case if any such merchant is live at your end, please deactivate the same with immediate effect,” said an email from the bank. Payment gateway firms, acting as vital third parties, are the link for transferring funds from a customer’s bank account to the payment portal of merchants. The software provided by a payment gateway enables online transactions through net banking, debit and credit cards, and Unified Payments Interface (UPI).
Confirming the development, Vishwas Patel, executive director, Infibeam Avenues (which operates the payment gateway CCAvenue), said, “We have been receiving strict instructions from leading banks to not provide PG services to any merchants who are dealing in cryptocurrencies or exchanges. Though the Supreme Court had set aside the RBI notification on this issue, some banks continue to deny banking services to crypto exchanges. It’s time the government steps in to enact laws and puts in place a framework to safeguard the interest of those investing in cryptos.”
If payment gateways continue to keep crypto merchants on board, the latter would be responsible for any fraud at the merchant’s website and reverse the full disputed amount to the customer, said ICICI. With this, the bank (despite the SC ruling) has decided to stick to RBI’s April 2018 directive banning banks and finance companies from dealing in virtual currencies (VCs) or providing services to facilitate any person or entity in dealing with or settling in VCs. Even though the Supreme Court lifted the ban in March 2020, there was no follow-up circular from RBI revoking the ban. Under the circumstances, some of the local and MNC banks have chosen to discourage the use of bank accounts to buy or sell cryptos. Some of the crypto deals happen through wallets and other entities without establishing the actual nature of the actual transactions.
Fintech and legal circles are divided on whether banks can clamp down on crypto trades. “After the Supreme Court judgment, there is no legal restriction on banks facilitating crypto-asset transactions. The RBI has also stated this in an RTI reply. If a bank denies service, it would hence have to justify it based on other grounds like non-satisfaction of KYC/AML norms and not merely because the transactions involve crypto-assets,” said Jaideep Reddy, who leads technology law at Nishith Desai Associates. An ICICI spokesman did not comment on ET’s queries. Senior bankers said while there has been no RBI directive post the SC ruling, the central bank in the course of meetings has hinted at its reservations on cryptos.
According to a member of FIAKS – a fintech and financial services forum for policy advocacy discussions – there is a risk that slamming the brakes may stifle innovation around cryptocurrency and Blockchain and drive the market underground. “Instead of policy ambiguity and roadblocks, the regulator and government should collaborate with the exchanges and others in the crypto universe,” said a FIAKS member. For instance, while the RBI has said that cryptos do not amount to currency, it has not clarified the treatment of crypto-assets under FEMA – whether resident Indians can legally purchase cryptocurrencies from overseas sellers.
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