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P2P warning: Banks May Freeze Your Account Based on What you Write in Remarks

Let me clarify with a disclaimer straight away. We at Coin Crunch strongly believe that Peer to Peer trading of cryptocurrency is valid despite the RBI diktat, however we recommend that the trading be done only through reputed and KYC compliant Indian exchanges to avoid any complications.  Read about Peer to Peer Exchanges in India.

After weeks of pushing from a few people who are regular traders of Cryptocurrency on Peer to Peer exchanges, we have decided to warn our readers about this one particular potential issue. 

Banks have a right to Close your Account if they find you trading in Cryptocurrency

First of all, despite whatever your friends, colleagues, even your bank staff tell you, banks currently have explicit rights to freeze your account if they find you using the account to buy or sell cryptocurrency. Why? Because RBI gave them the order.

On April 6, RBI published a circular asking banks to close ties with all individuals and business that deal in cryptocurrency within three months. While many exchanges shut down their INR services when the deadline arrived, some suffered the fate of losing their bank accounts. So did some individuals.

“In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs.”

RBI circular RBI/2017-18/154 DBR.No.BP.BC.104 /08.13.102/2017-18

So if they find out you are using your account for cryptocurrency trading, it can be shut down. 

P2P trades are Mostly Done by IMPS/UPI

Most peer to peer exchanges, even when it comes to INR P2P exchanges, offer IMPS/UPI payment methods. It means that someone who wishes to sell cryptocurrency will give his or her bank account details to someone who wants to buy it.

The buyer will then have to make the transfer to the seller and once the seller confirms, the buyer receives the cryptocurrency. Don’t worry, this process is secured by escrow service that will neither allow the buyer nor the seller have the cryptocurrency until the whole transaction is completed.

The Mistakes made in Remarks

Several Peer to Peer exchanges such as LocalBitcoins, Bitbns, Coindelta Flux, Koinex insist users to enter a particular remark while making the transfer. This is a random text. However, some exchanges do not mandate a specific remark.

In such a case, a buyer while transferring the money, enters something like “for Bitcoin”, “BTC”,  “for ETH”, “for ZRX”, “buying crypto” or “buying Ripple XRP”. You get the idea. If you didn’t, look at the picture below.

I have entered “Buying BTC” in the remarks while making a UPI transfer using GooglePay.

Do not enter Cryptocurrency details in remark while sending Money for P2P trade 

By writing the name of the cryptocurrency, you are effectively hinting the bank that the particular transaction is for buying cryptocurrency, thereby jeopardising the accounts of both buyer and seller.

Another example shared on a telegram group Crypto Shooters was more specific. 

Remark contains amount of BTC purchased

The Good News

The good news is that not a single case of account freezing due to remarks has been reported to Coin Crunch yet, for individuals. We’ve been notified by sources that after the RBI deadline ended, many of the accounts of exchanges were frozen only because the banks recognised their true purpose from the remarks. 

For individuals though, prevention is better than cure. 

The banks will have a strong reason to freeze your account if you’re using it to trade cryptocurrency as I said before. So avoid doing it. Write a random thing or just don’t write anything. You’ll be safe that way.   

Update: Screenshot updated. 

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