It used to be Indian banks preventing crypto exchanges from accessing services under the direction of the Reserve Bank India, but banks are now beginning to partner with these crypto providers to support their services.
Kotak Mahindra bank has this week started a partnership that allows WazirX — one of the largest crypto exchanges in India — to run a cryptocurrency account. This comes after WazirX witnessed frustration with other banks despite an earlier Supreme Court ruling whitelisting crypto activities with banks. Traders on the exchange will be able to receive and send money through the bank. It is one of those moves showing that banks and crypto businesses are starting to align themselves, ready to tap new business opportunities under an upcoming crypto regulation in India.
The Indian crypto industry spans more than 15 million crypto owners or 7.3 percent of the population, which makes the country one of the top five in the world in terms of the number of crypto users in a single country. The country has so far witnessed 100 crypto startups in 2021, which brings the total to around 400 crypto startups according to a Tracxn report. And in the rear-view mirror of industry uncertainty, two Indian crypto unicorns — CoinSwitch Kuber and CoinDCX – were born this year as evidence the industry was booming fast. The Indian crypto valuation is now about $1.9 billion, up from $500 million earlier this year.
Apart from Mahindra bank, over 10 other banks – mostly privately-owned ones – are also allowing crypto transactions via the Unified Payment Interface platform. However, most banks are still reluctant to allow crypto exchanges and businesses to operate accounts with them. Nevertheless, it could be a matter of time before this changes as it has already become clear from recent developments that crypto regulations will be soon in place to facilitate that, instead of preventing it.
Most banks are awaiting the enforcement of the upcoming crypto bill to engage with crypto exchanges in the country. The upcoming Indian crypto bill is also likely to open more avenues for banks to engage with the crypto industry instead of creating a blockage. For instance, it is championing a uniform KYC process for all crypto exchanges, which when adopted, could improve the crypto industry outlook.
However, the new bill, if adopted as law, also means regulators like the Securities and Exchange Board of India would be able to scrutinize activity and transactions when they need to. The bill will also require crypto business owners engaging with their banks especially for business transactions to do tax reporting on those activities.