Cryptocurrency traders and investors in India have been among the recent victims of the growing trend of closing personal accounts through global banking.
India’s parliament is currently considering a nationwide cryptocurrency ban, which local industry critics like former Coinbase CTO Balaji Srinivasan have compared to a “five-year internet ban.”
The Economic Times reported that clients from private banks in India such as HDFC, HSBC and Citi received messages this year asking them to clarify cryptocurrency-related transactions, and often require them to visit a local bank branch in person. If this clearance is not received, accounts may be blocked or stolen. A letter to an affected buyer states:
“In order to comply with government requirements, banks are advised to exercise caution by carefully reviewing transactions on an account on an ongoing basis to alert users, holders and sellers of virtual currencies, including bitcoins, of the risk.”
In 2020, the Supreme Court of India lifted the reserve in India that banks had to stop offering services to cryptocurrency traders.
The Indian Parliament is expected to pass a new bill that will limit the economic activity of traders, and prominent representatives of the Indian cryptocurrency community have spoken out against it. Satvik Vishwanath, CEO of India’s Unocoin, believes there is a need to move in the opposite direction to drive the growth of the fintech space in his country. “By having cryptocurrency on its side, a country can expand a large number of non-knock people,” he said.
Banks also proactively close customer accounts linked to the transfer of funds to or from cryptocurrency exchanges in a number of countries.
On February 5, the Central Bank of Nigeria banned financial institutions operating in the country from “facilitating payment by exchanging cryptocurrencies”, which led to the immediate closure of bank accounts associated with the stock exchanges and those behind them.
In the UK, HSBC recently stopped accepting transfers from cryptocurrency exchanges. Lloyds Bank, a British retail and commercial bank, has stepped up its efforts to disconnect cryptocurrency traders, as podcast maker Peter McCormack revealed in a tweet on 22 February. However, it can be a self-inflicted wound.
A long-time British bitcoin investor who wished to remain anonymous, Cointelegraph said that large banks across Europe are increasingly distancing themselves from cryptocurrency traders. He said that new accounts from banks are rejected based on their participation in cryptocurrencies.
“I wanted to go openly to the new bank and be honest,” he says. “But I met a brick wall.” The investor claims to have placed “six-figure amounts” through HSBC “without any problems”, but old accounts are treated differently than beginners.
“If you do not tell them, and you do, it sounds good. But if you ask, it is not. “