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Indian Banks warn customers against Cryptocurrency transactions

Indian Banks warn customers against Cryptocurrency transactions

HDFC Bank published a treasury report on May 27 titled Cryptocurrencies: Fad or Forever? stated that “The strong correlation between bitcoin prices and Google searches indicates that it is perhaps more of a fad, The bottom line is that it seems to be highly speculative.”

The HDFC Bank report was confident that, like gold, bitcoin could grow into a significant asset class. “We find a positive correlation between gold and Bitcoin’s daily returns. Though the correlation was weak to start with, it has been rising… from a portfolio diversification perspective, it has the properties of being a good hedge,” the report added.

Nevertheless, the report warned that a strong association between bitcoin prices and google searches symbolizes that it is perhaps more of a fad.

On the other hand, HDFC Bank said they reduce the cost of managing and transferring cash, help financial incorporation, and improve cross-border payments capability. “Additionally, central bank digital currencies (CBDCs) could speed the delivery of directed stimulus (helicopter money) to support the economy during a crisis/economic stress, thereby creating upward pressure on prices,” the report added.

However, recently HDFC Bank, has advised its customers officially against trading in cryptocurrency.

Supreme Court of India, in March last year, stated that RBI has failed to prove the damage that these tokens are doing to the financial system and hence lifted the curb on cryptocurrency.

Still, organizations, such as HDFC, SBI Cards & Payment Services, have sent out mailers saying that services may be halted if customers use their cards to deal in cryptocurrencies and recommend against such transactions referring to a 2018 circular from the RBI, which the Supreme court already lifted.

Sanat Mehrotra, from Gurugram, Delhi, who has held a savings account with HDFC Bank for the last 13 years, has also been using it for making investments in cryptocurrencies shared:

Anirudh Rastogi, the founder of Ikigai Law, represented the crypto exchanges before the Supreme Court stated that

Banking is an essential service that should not be denied to anyone but for a good and proportionate reason. The Supreme Court had held that a banking ban on crypto-users is disproportionate. While the judgment applies to RBI and not the banks, it is, as their regulator, morally obligated to intervene.

A bitcoin address shows the source of a bitcoin payment. The number of bitcoin addresses with non-zero balance stood at 33 million as of December 2020 compared with 3.9 million addresses in 2014.

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