WazirX is looking to open business with Kotak Mahindra Bank, and although sources said that a formal tie-up has been established, operations have not yet commenced. This development, first reported by Economic Times, comes eight months after MediaNama broke a story on how private banks, including Kotak Mahindra, shut off its banking services to cryptocurrency exchanges in India.
Although WazirX co-founder Nischal Shetty said that that cryptocurrency exchange does not have any operational relationship with any bank, he did not categorically deny the tie-up which sources say have been made on paper. The ET story attributing to an unnamed source said that WazirX’s account on Kotak will be used to pay and receive money from investors on the exchange. We have reached out to Kotak Mahindra for a comment on the matter.
WazirX does not have any operational relationship with any bank as of now. Unfortunately, banks seem to be wary of dealing with exchanges despite the Supreme Court’s verdict and RBI’s recent circular. We continue to engage with various banks with a view to help them understand blockchain and cryptos better… We hope that it encourages banks to update their compliance teams and provide banking access to Indian crypto exchanges — Nischal Shetty, co-founder, WazirX to MediaNama
The ET report also said that Kotak Mahindra is also in talks with other crypto exchanges for resuming business. On reaching out to CoinDCX, a spokesperson said that the exchange has already onboarded a few banks on its platform.
Although the ambit of what the Cryptocurrency and Regulation of Official Digital Currency, is up for speculation, there is a growing consensus that cryptocurrencies are not going to be banned, but regulated. It is safe to assume that when that happens, many more banks would be looking to resume their businesses with crypto exchanges.
Banks had stopped business acting on RBI directions
In May, several private sector banks — HDFC Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank and ICICI Bank — shut off their business to crypto exchanges. Then, an unnamed founder of a cryptocurrency exchange had told MediaNama that banks shut their accounts because Reserve Bank of India was apprehensive about allowing payment companies to continue their services to crypto exchanges since the government was allegedly planning to ban cryptocurrency investments.
“We approached our bank manager and found that this is not a specific bank policy. The bank did not stop account services because we are non-compliant with Know-Your-Customer or Anti-Money Laundering rules, but because they have received instructions from the RBI to stop such services,” a founder on the condition of anonymity had told MediaNama.
Since then, several stakeholder meetings have been held by the government with those in the crypto industry, giving rise to speculation that the government has eased its stance on banning cryptocurrencies. You can read about the other signs that suggest India’s crypto bill won’t ban cryptocurrencies here.
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Government may allow crypto as an asset, but not for payments
According to another Economic Times report, India’s crypto law would regulate cryptocurrencies as assets but their use as currencies will be banned. Under the bill, the Securities and Exchange Board of India (SEBI) might be appointed to regulate cryptocurrencies the source added. These are other things that we may see in the upcoming cryptocurrency bill —
- A balanced approach: “A middle path that balances the concerns of all stakeholders is more likely,” a government source told ET on the possibility of the Indian government banning cryptocurrencies. Considering that Indians have made large investments in crypto assets, an outright ban is unfeasible, the source added.
- 1% GST for exchanges: The crypto legislation will classify cryptocurrency exchanges as e-commerce platforms and levy 1% GST collected at source, CNBCTV18 has reported.
- Broad regulation: The crypto bill is planned as a broad regulation to give cryptocurrencies legal credence in India, ET reported. The bill will not go into sub-categorizing the different types of crypto assets, the report said.
- Timeline: While the bill might be presented to the cabinet in two to three weeks, the draft will be presented in Parliament in the Budget session, according to an ET report.
What is happening in the Parliament?
The Union government listed the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, for introduction before the start of the winter session of the Parliament. On the Lok Sabha agenda, the description of the bill was unchanged from when it was earlier listed in February this year. The unchanged description caused many crypto investors in India to panic sell their holdings, owing to which prices of all major cryptocurrencies plummeted.
Soon after that Finance Minister Niramala Sitharaman clarified that the Lok Sabha had mentioned the old bill in its listing and the government was bringing a new cryptocurrency bill which would be presented to the Cabinet soon.
Also read:
- BCCI asks IPL teams, media channels to stay away from crypto sponsorships: Report
- How cryptocurrencies get their value, are we in a bubble, and can crypto be regulated? Raghuram Rajan answers
- All the signs that suggest India’s crypto bill won’t ban cryptocurrencies outright
- Crypto without oversight is a threat to sovereignty: Maharashtra IGP Brijesh Singh
