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article imageSome Indian banks clampdown on accounts linked to cryptoexchanges

By Ken Hanly     Jan 21, 2018 in Technology
Many top Indian banks have either suspended or at least curtailed the functionality of accounts linked to cryptocoin exchanges. The banks justified their actions by citing the risk of dubious transactions.
Banks involved
The State Bank of India (SB) Axis Bank HDFC Bank, ICICI Bank, and Yes Bank all took strong action on accounts that were linked to cryptoexchanges. The Cointelegraph article originally reported that the Metropolitan Bank had put a halt on all wire transfers for cryptocurrency exchanges but later issued a retraction and apology when the bank reported there was no change in its policy.
Why action has been taken
Advocate BIvas Chatterjee has recently filed a public interest litigation in Calcutta to impose immediate regulation on bitcoin and other cryptocurrencies.
Earlier near the end of last year, the Indian Ministry of Finance called bitcoin a Ponzi scheme. Together these two events were partly the cause of the actions of some banks. Other banks appear to be carrying on as before.
The move perhaps reflects what seems to be a general mood internationally of a need to ensure better regulation of cryptocurrency exchanges.
Report claims less than one percent of bitcoin transactions involves money laundering
One of the fears of critics of cryptocurrencies is that since they are anonymous and take place outside the regular financial system they can be used for illegal activities such as money laundering.
A recent analysis team of FDD and Ellicit, a bitcoin forensics company, claimed that less than one percent of bitcoin transactions involved money laundering. The report was written in order to analyze the flow of funds and to discover the degree to which transactions involve money laundering. While the report shows that perhaps the practice is not a big problem for bitcoin, other coins could be being used for money laundering.
The report claims: “The amount of observed Bitcoin laundering [is] small and darknet marketplaces such as Silk Road and, later, AlphaBay are [generally] the source of almost all of the illicit Bitcoins laundered through conversion services.”
Silk Road was closed down back in October 2013 by the Federal Bureau of Investigation((FBI) although several other successor sites were also in operation briefly.
The report claims that most illicit bitcoin transactions were in Europe, five times as many as in North America. It also proposes that the best way to combat money laundering is to have more stringent anti-laundering measures(AML) and that all financial authorities in all jurisdictions increase enforcement of them.
Indian government reported to have sent tax notices to cryptocurrency investors and traders
A recent survey in India found that its citizens had carried out more that $3.5 billion worth of trades and other transactions with cryptocoin traders over the last 17 months. The government collected data from nine exchanges within India. Consequently, tax notices have been sent to "tens of thousands of people"
The government is looking to tax capital gains. It also wants information as to how much people own in cryptocurrencies. After the government collected data last month in an attempt to identify users. The government suspects that cryptocurrency traders were avoiding taxes.
Indian officials are also interested in looking for instances of money laundering.
Indian cryptocurrency regulations unclear
While Indian officials have often been critical of bitcoin, other cryptocurrencies and exchanges, the official position remains murky. At least two petitions and a note by the Indian Supreme Court have all sought guidance as to official regulations.
However, the Indian government has not released any new regulations. According to Reuters, B.R. Balakrishnan said that the tax authority could not wait for an official statement from the government. Balakrishan said:"We cannot turn a blind eye. It would have been disastrous to wait until the final verdict was out on its legality ... We found that investors were not reflecting [cryptocurrency gains] and in many cases, the investment was not accounted for."
More about Banks in India, Taxation of cryptocoin transactions, money laundering with bitcoin
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