Indian banks imposed “informal restrictions” Cryptocurrency Trade surfaced after money laundering concerns on Indian crypto exchanges amid Dogecoin frenzy Investors and success of an aggressive marketing push through repeated TV spots during the Indian Premier League (IPL), several industry sources.

Earlier this month, major banks, particularly private sector lenders, ICICI Bank and IndusInd Bank, requested payment gateway partners to stop processing such transactions. Other banks such as HDFC Bank, Yes Bank, State Bank of India and Kotak Mahindra Bank had previously declined these transactions.

In the past few weeks, crypto platforms in India have been banned from processing payments by all major payment gateway service providers on the orders of lenders such as ICICI Bank.

Several crypto platforms have lost the ability to accept deposits of rupees through banking channels NEFT, IMPS, and RTGSas well as the Unified Payments interface.

Banks and industry insiders said they have stopped issuing merchant IDs to payment gateways and have urged these intermediaries to tighten controls on handling cryptocurrency exchanges in India. Banking industry insiders pointed out that these restrictions could be due to informal instructions from the Reserve Bank of India (RBI) to banks calling for stricter compliance with existing money laundering laws.

However, none of the banks or gateways have issued written instructions setting out the logic behind these curbs, causing confusion in the country’s burgeoning cryptocurrency industry. “Since the RBI has not issued any formal instructions or circulars, you cannot even protest,” said an industry source. “It’s kind of like a stealth method of creating problems for crypto exchanges, which is very unfortunate.”

Notice of the court order

Crypto platforms for their role, they are about to send a notice to all major banks about the February 2020 Supreme Court ruling that lifted the banking ban and stated that the central bank cannot provide formal guidelines or directly regulate this exchange .

The RBI only responded to an email with a request for a comment at the time of going to press. Crypto industry officials stated, “They plan to first send letters to banks informing them of the Supreme Court order so that they can be formally informed of the court’s decision.” The most important lenders such as HDFC Bank and Kotak Mahindra Bank had stopped working with crypto platforms despite the order of the Apex Court. Banks of all sizes have also been under pressure again in recent months not to participate in crypto platforms. In the current scenario, cryptocurrency exchanges use the services of private wallets and smaller banks to maintain business continuity.

Several well-known sources said that the RBI has issued informal instructions to banks as the crypto ecosystem grows without government oversight.

According to the sources, the aggressive marketing boost from the crypto exchanges on TV during the IPL is one of the most watched programs on TV. OTT channels and social media Influencer has pushed the regulator to put pressure on it because the industry is not licensed in India.

A payment gateway executive said. Since they have reached out to all of our cryptocurrency customers at the direction of our partner bank to inquire about their arbitrage handling process, they want to ensure that anti-money laundering rules are properly followed. This is a lucrative business for us, but the chargeback fees on fraud fall on banks and PGs (payment gateways) which are quite high. “Citing examples of crypto exchange fraud in Turkey and Estonia in recent years, the cryptocurrency remains at regulatory risk unless the government drafts formal law.

Transparent release

In the meantime, the crypto exchanges are aware that the banking partners are tightening controls. They were transparent in their information and customer onboardings. Some of the self-regulatory steps are to steer clear of terms like “trade” and “astronomical returns” in your marketing initiatives. Additionally, the various crypto platforms state that they include a disclaimer at the end of every ad to help educate customers about the unregulated nature of the industry. Ramalingam Subramanian, Chief Marketing Officer at CoinDCX, said that as a self-regulation we were spreading the message that this is a volatile market and that one should enter this market with caution.

Sharan Nair, the chief business officer of Coinswitch Kuber, who aggressively advertised during the IPL, stated that outside parties responsible for broadcasting the adverts, in addition to strict internal controls, previously obtained legal approvals over the image of the adverts during the cricket Series issued. Legal experts also stated that cryptocurrency advertising and marketing is not illegal at all in India.

Akshay Nagpal, partner at L&L Partners, stated: Under the rules of the cable television network, advertising for cable services cannot break the law. Meanwhile, the Supreme Court’s decision on cryptocurrency, cryptocurrency trading, is not illegal or unlawful until Parliament makes it a law. So there doesn’t seem to be any barrier to promoting or trading cryptocurrency.

According to Rahul Goel, partner at AnantLaw, the government has not yet proclaimed cryptocurrency as an illegal means of payment. “In fact, the change in company law requires disclosure. Anything that is illegal or prohibited by law cannot be advertised. In fact, Air India’s official in-flight magazine is used to advertise the cryptocurrency.

Doge Day conclusion

Sources pointed out that Dogecoin’s growing popularity in India was also a key concern of banking regulators. Dogecoin, an unlimited meme token backed by the founder of Tesla electric vehicle maker, Elon Musk, is known for its volatility and is viewed by several Indian traders as a way to get quick returns by trading intraday on these exchanges .

The trading volume of Dogecoin from India has more than tripled since April, and platforms have seen record-breaking transaction volumes, according to a payments industry source overseeing these transactions. On May 8th, The Elon Musk presented major crypto exchanges such as CoinDCX, WazirX and Tiger on an American TV show that was supposed to increase the price stamp GlobalCoinswitch-backed Kuber lost access to direct bank deposits and instant transfer.

“Due to congestion problems in our banking partner’s network, Instant IMPS, NEFT and RTGS options are currently not available,” CoinDCX wrote in a note to customers about its CoinDCX GO app. Coinswitch Kuber said on Twitter: “We have temporarily suspended INR deposits due to a problem with our banking partner.” Despite the decline in critical bank access, exchanges saw high volumes of Doge INR trading.

For example, users of WazirX, which survived from peer-to-peer transfers, traded Rs 820 billion worth of Dogecoin on May 9th. According to WazirX, the problem with the banking partners was resolved and the partner rolled out access in batches.

Coinswitch Kuber’s Doge’s trading volume exceeded Rs 600 crore on the same day. Most crypto exchanges have partners or self-directed educational programs to teach crypto to retail investors. CoinDCX announced that it has strict internal conformities and only lists tokens that meet certain standards and comply with local laws to protect retail investors. Doge has hit the threshold, according to a CoinDCX spokesperson.