TL; DR Breakdown
- WazirX has agreed to partner with Kotak bank to provide crypto services.
- The partnership comes amid a reluctance by banks to offer the service.
Indian’s will soon be able to transact cryptos through a mainstream bank. This follows the signing of a deal between WazirX India’s leading crypto exchange and Kotak. The latter is India’s third-largest bank by asset base.
The Economic Times of India first broke the news in its December 6 reporting. According to the outlet, WazirX has opened an account with the $64 billion valued bank. It’ll use the account to enable transactions within its exchange.
WaxirX’s account is yet to go live, though. Sources privy to the development said that paperwork was holding the process. Among the requirements that the exchange has to fulfill is a thorough know your customer (KYC) audit.
Neither WazirX nor Kotak could confirm the information by press time. Attempts to get a comment from the bank were unfruitful. The institution’s spokesperson declined to discuss the matter.
WazirX, Kortak deal a boon for crypto
The move has got tongues wagging about its prospects. Pundits have hailed the move as a breakthrough for the crypto industry. It comes at a time when the banks have shied from offering those services.
For eight months now, Indian banks have ceased crypto transactions. They cite unclear regulations around the asset class for their decision. Often, they’ve resorted to an invalid circular from the country’s central bank (RBI) to justify their stance.
The circular in question dates back to 2018. In it, the RBI had barred banks from offering crypto services. However, the RBI has since vacated the circular. The decision follows the Supreme Court’s (SC) invalidation of the circular in March 2020.
That decision paved the way for banks to resume crypto transactions. However, banks have until now shown a reluctance to accept cryptos. It’ll be interesting to see what impact the new relationship brings to the market.
Regulators’ change of heart
Ramesh Kailasam, the chief executive (CEO) of IndiaTech.org, has weighed in on the matter. He confirms that banks have lagged in taking advantage of the court decision. That’s even after the RBI moved to uphold it.
The RBI has since clarified that banks can offer crypto transactions on the strength of that ruling. That said, they have to adhere to several regulatory requirements.
One of those requirements is undertaking due diligence of their customers. They have to carry out thorough KYC and anti-money laundering (AML) checks, for starters. Additionally, they have to do Combating the Funding of Terrorism (CFT) reviews.
Besides those, they have to comply with India’s Foreign Exchange Management Act. Further, the banks need to ensure they have a sound financial risk to health ratio. The CEO affirms that banks meeting these conditions are free to trade cryptos.
To some analysts, the WazirX-Kotak relationship is indicative of a thawing of regulators’ anti-crypto stance. The partnership coincides with the Indian legislature introducing a crypto bill for discussion.
Through the bill, the government wants to bring cryptos under India’s tax ambit. The move is a departure from outright bans, as some quarters in government had called. Market players are upbeat that this “tacit” recognition of cryptos will push their uptake.