India, the land of one of the oldest civilizations, has existed for thousands of years. To survive for so long, one needs great tenacity and a certain acceptance of fate. There is also an ability that is colloquially known as ‘jugaad,' the closest English equivalent is a hack. So when Banks in India started to close the accounts of customers thought to be involved in crypto trading, people found simple jugaads to bypass the scrutiny.
Banks Caught In A Bind
While the Supreme court of India has yet again postponed the hearing of its case pertaining to Cryptos, Banks have gone ahead and implemented the central banks, the Reserve bank of India, directive. Compliance to the circular requires the banks to effect bans and deny services to customers or businesses that are found to be dealing in digital assets.
Thus banks are required to close accounts that might have made crypto related transactions. This means they are expected to carry massive sweeps on their customer base and check on how people are spending their own money.
To make things worse most people savvy with these things, have already found ways to circumvent the banks screening and workarounds to avoid account closures.
How Do The Users Avoid Account Closures?
According to Instashift, a local cryptocurrency exchange, banks are closing accounts based on a simple search of any cryptocurrency-related words in the transaction remarks. This means that when a customer’s bank account is being scrutinized by a banking official, they are looking for keywords such as crypto or bitcoin in the remarks. If found the account is most likely to be closed off.
As one would imagine, the solution is to just not leave such notations. As Nischal Shetty, the CEO of Wazirx explained,
“Majority of the people understand not to enter such terms in the remarks. So simply avoiding entering anything related to crypto in the payment remarks is more than enough to avoid any problems from banks.”
He went on to suggest that the banking system has no verifiable method to confirm if a P2P transaction was used for crypto or non-crypto purposes.
Echoing the exact sentiment many Indian twitteratis are posting similar suggestions. A user, Cryptomanic has suggested
“Use P2P without writing anything related to crypto in remarks. And don’t do heavy transactions.”
Another one, Vivekmacha, concurs and advised for making use of P2P, as it cant be tracked. He further repeated the importance of making sure no crypto- related terms are noted in the remarks, for any reason.
More Than Enough Options On Offer
A solution that has been gaining in popularity recently is P2P, exchange-escrowed peer-to-peer style of trading. The popularity is unsurprising, ever since the central bank initiated the ban on digital assets and more and more crypto exchanges in India are gravitating towards offering this type of trading.
Another simple solution offered is to open another account. An Instashift spokesperson suggested that if crypto users have their accounts closed, they can simply start “a fresh account in another bank.” With the new account, they merely need to be more cautious and ensure that if they are trading, they do so without using any crypto terms that might draw attention.
Since all bank accounts are created using a Permanent Account Number, Indias water-downed version of the US social security number, the same person opined
“It’s easy to open a new account for a person in India & banks also welcome people to open accounts.”
Rigorous Action By Multiple Banks
The closing of accounts is, unfortunately, not an isolated instance, with many people reporting problems with banks, big and small, closing accounts which shows any crypto activity. Kotak Mahindra Bank, the banking branch of a major Indian industrial family and Digibank, a bank backed by the powerful Asian financial group, DBS, recently made the news. They have been sending letters to their customers advising them of impending account closures. One person affected by this took to Twitter.
Indiancryptogirl posted letters she says were sent to her. The letter simply stated that it had found some transactions with brokers who dealt in virtual currencies. As India did not consider such transactions legal the bank was
“constrained to place a credit freeze in your account. Further as per the extant guidelines, we are required to exit such relationships where transactions with brokers/traders, dealing in virtual currencies are observed.”
The letter ended with the notification that
“Hence 30 days from the date of this communication your account will be closed by the bank.”
This is not an isolated incident of some bank targetting customers with an affiliation for cryptos, numerous such cases have come to light in the recent past. Telling a similar story is Pushpendra Singh, who banks with the smaller UCO bank, but claims that this same modus operandi was followed there as well. A similar complaint reverberated in the words of Bluecrypto on Twitter who said,
“the same happened to me and my HDFC account got closed.”
Not only that, but most Banks now also follow a similar policy like Standard Chartered bank which explicitly requires, those who are looking to open an account in India to specifically agree to not engage in any sort of dealings in digital assets.
The issue of banks deciding for their customers how they can spend their money is in the front and center of this story. However, as Yatharth Vashishth pointed out, that banks are not the sole bearers of this burden as they are only following RBI’s order.
“Bank is acting as per regulations by the RBI. All banks are instructed to shut accounts of all entities dealing in crypto. ”
It does appear that banks are hapless and forced to toe the line, set by the central banks and, many suspect, a government not trusting the technology. While one can hope that the nations notoriously lethargic judicial systems come to the rescue, it is already clear that the second most populated country on the planet is working on hacks to join the crypto market and blockchain revolution.