India's biggest banks weigh their options, hold off on servicing crypto firms in wake of Supreme Court ruling

Major banks in India are weighing their options and have not yet begun servicing crypto exchanges after the Supreme Court's landmark ruling earlier this week.

"We will be guided by the Reserve Bank of India's (RBI's) directions on the matter and once we get clarity we will act appropriately," Shekhar Bhandari, president of global transaction banking at Kotak Mahindra Bank, told The Block.

Other top banks, including ICICI Bank and the State Bank of India, are also still discussing the matter internally, The Block has learned. HDFC Bank declined to comment, while Axis Bank did not respond to requests for comment by press time.

In April 2018, the RBI barred banks from serving cryptocurrency exchanges and firms. The banking ban prompted several exchanges to file petitions that sought to overturn the RBI move – a process that culminated in Wednesday's court ruling that saw a three-judge panel toss out that ban.

Early supporters 

While major banks are still sitting on the sidelines, a few banks have got the ball rolling to support crypto exchanges. Unocoin, Binance-acquired WazirX, and CoinDCX have already gone live with bank account transfers.

Unocoin co-founder and CEO, Sathvik Vishwanath, told The Block that the exchange's banking partner is Karnataka Bank. The bank did not respond to request for comment by the press time.

Vishwanath further said that Unocoin would partner with four to five more banks "in the coming weeks," adding that some banks themselves are approaching him. He declined to share the names of those banks.

WazirX's banking partners are HDFC Bank and Central Bank of India, The Block has learned. HDFC Bank declined to comment, while multiple calls to Central Bank of India went unanswered. 

CoinDCX, on the other hand, said it had not targeted a specific bank to integrate bank account transfers. "It is a technical integration with multiple banks designed so that traders may buy and sell cryptos using their bank. This is a similar set up to leading e-commerce platforms that accept bank transfers as a payment method," CoinDCX told The Block.

Overall, the sentiment remains positive after the ruling among Indian crypto exchange players. WazirX, Unocoin, and CoinDCX have all reported increased trading volume.

WazirX founder and CEO Nischal Shetty told The Block that within the first 24 hours of the ruling, the exchange's trading volumes surged to $5 million and is currently around $3 million.

Unocoin's Vishwanath said the exchange had seen over $250,000 worth of trades in the last 30 hours since it started facilitating bank deposits and withdrawals. CoinDCX declined to share volume figures but said it had seen a five-times increase in sign-ups.

"We are expecting the growth of sign-ups to continue," the exchange added.

Relaunches?

Market observers told The Block that the ruling would also result in shuttered exchanges getting opened up again.

At least one exchange – Belfrics – is planning to relaunch its operations "most probably by April," the exchange's founder and CEO, Praveen Kumar Vijayakumar, told The Block. Belfrics was running in India from 2017 and stopped after ICICI Bank closed its accounts in April 2018, said Vijayakumar.

Notably, Belfrics is operational in other countries such as Malaysia, Kenya, Nigeria, and Tanzania, said Vijayakumar, adding that the exchange is also seeking licenses in Japan, Spain, and Mexico.

It is not clear whether other shuttered exchanges, such as Koinex and Coindelta, will relaunch their operations too. Multiple requests for comment to founders of both the exchanges went unanswered by the press time.

In a new twist in the ruling, the RBI is reportedly planning to file a review petition in the Supreme Court. While the central bank has an option to do so, "grounds for review are generally narrow," a lawyer, who wishes to remain anonymous, told The Block.

It is also reportedly rare for the Supreme Court to admit reviews, and, according to the Constitution of India, a judgment of the court becomes the law of the land.

Interestingly, exchange players do not seem to be worried about the review petition report. WazirX's Shetty and Unocoin's Vishwanath both said the chances of a review petition advancing are slim.