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Are you lying to your bank about crypto trading?

Crypto traders are telling banks they don’t deal in digital assets to avoid harassment and locking of funds.

Fighting a fight against establishment is not just extremely difficult, but also detrimental to your financial health. Indian Crypto traders live in constant fear of an unexpected reaction from the banks that hold their savings/salaries if they were to find out their clients are actively trading crypto assets.

While crypto trading was never illegal in India, a circular from the Reserve Bank in April 2018 had restricted banks from providing services to individuals and businesses dealing in crypto assets. This circular was quashed by the Supreme Court in March 2020.

Despite losing the case, RBI has not redacted their circular from the website, which is the banks are using as a guideline set in stone to take action on the accounts held by Crypto traders.

In June, Axis Bank, India’s third largest bank began targeting WazirX Exchange users, making them sign a declaration effectively saying that no transaction on the bank account was done for trading Crypto assets and no transactions will be done in the future. Some users Coin Crunch spoke to said, they either signed the declaration out of fear or closed their accounts.

Reports started coming in that PayTM payments bank is freezing accounts of users suspected to have traded Crypto assets. While Axis bank did not freeze the account right away, PayTM is first blocking the funds and then opening the lines of communication with the affected user.

When opening a Kotak Bank account, clients have to sign a box against the declaration to not deal in crypto assets.

Why Should Banks Question Users?

The simple answer is, Banks can so they do. The more complex answer is, we sign an agreement which gives the right to our banks to freeze our funds, if they suspect anything fishy.

Even before the infamous RBI Banking Ban, banks in India were freezing or blocking accounts for Indian users and exchanges. One payment processor had shut its access to major exchanges overnight in December 2017 leading to massive outage of services on exchanges. The real problem is that the people we talk to everyday at our bank, aren’t going to be completely aware of the whole truth.

The senior management at all the banks must be well aware of cryptocurrencies. Most of them have their own blockchain projects in works. However, the lower or middle management, the people who sit in our local branches who will bank with, they may not be fully aware of the reality.

Many users complained, despite showing an RTI copy that clearly says RBI has put no prohibitions on banks, the banks quote the April 2018 circular to enforce the directive. The stance doesn’t change even after showing the Supreme Court Judgment, that quashed the April 2018 circular.

Many crypto traders in India use their primary bank account to move their funds to and from crypto exchanges. Hence, when the bank blocks their accounts, they are left with no alternative and their savings are frozen indefinitely.

This fear and education from other users’ incidents, have led to rise in crypto traders opening multiple bank accounts, trying to coax their local managers or simply lying about their transactions.

Users Lie to Banks with no other choice

Banking, while being one of the easiest in India, still has its own set of problems. Opening a new account requires for the bank executive to come home and verify user identity. Sending funds to a new payee is restricted by most banks to avoid frauds. OTPs are not always delivered. Transactions don’t always go through. All these reasons make it difficult for traders to simply open a new account and use it.

So what do they do? Lie.

“I signed it (Axis Bank Declaration), so they will not freeze my account. Two days I did not trade anything and moved all the money to my father’s account. Now I have started trading again, but I ensure my bank account has zero balance and any incoming funds are moved immediately”

Affected user, identity not revealed for privacy of the user

No one can say with utmost certainty which bank will not cause an issue about crypto trading. You can wake up to a letter or an email from your bank any morning, saying your account was blocked. That is the risk that every crypto trader in India is taking.

“It is tough, but open as many accounts as you can and use one account every week for trading”, says Ruchir, who invests in crypto using multiple Indian exchanges. The tip makes sense. Banks are watching their backs so we need to watch ours.

Without explicit regulations around crypto assets’ trading, issues like these will keep propping up every few days. To expect banking support, might be too much to ask without it.

Many users simply sign any declaration they are asked to. Close the account, if they have to. Or just lie to the bank. It is neither worth the time nor effort to fight the conglomerates. If a bank closes our account, there are 100s of others who will welcome us with open arms.

So what do we do when the banks come questioning us? Do we say we don’t trade crypto or do we say Tata Bye Bye? Let us know in the comments below!

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