India’s biggest private lender, HDFC Bank, has stopped its customers from using their credit cards and prepaid cards to purchase bitcoins. Over the past few months, several global banks have banned the used of credit cards for purchasing volatile digital assets. However rather than protest, some local exchanges are actually welcoming HDFC’s decision.
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HDFC Bank joins the league of Indian banks that include Kotak Mahindra Bank and Citi Bank, that have banned the use of their credit/debit cards to purchase bitcoin.
Credit Cards and Debit Cards Are Banned, but Online Banking Still an Option
On March 13th, HDFC Bank broadcast the news by emailing its customers on the ban on credit card use for buying cryptocurrencies. A section of the email read:
Alert: HDFC Bank Credit, Debit and Prepaid Cards not permitted for purchase/trade of Bitcoins, Cryptocurrencies and virtual currencies. You may be aware of the increasing global apprehensions regarding Bitcoins, Cryptocurrencies and virtual currencies. The Reserve Bank of India has also cautioned the public regarding the potential economic, operational, legal and security-related risks associated with dealing with such currencies.
The move is to only stop the use of credit card for purchasing cryptocurrencies — that is, digital assets that are regarded as money-like tokens. Meanwhile, buying other digital assets is still possible via net banking. Once a user’s bank accounts is linked to their exchange account after thorough verification, they will be allowed to purchase digital tokens via online banking.
According to HDFC, the reason for the ban as to ensure the security of its customers. It stated, “To ensure our customers’ security, we have decided to not permit usage of HDFC Bank Credit, Debit and Prepaid Cards towards purchase or trading of such Bitcoins, Cryptocurrencies, and virtual currencies, on merchants suspected to be dealing in crypto-currency or online foreign exchange trading or both.”
Cryptocurrencies are not a legal tender in India (or elsewhere) and the government’s stance on digital currencies is fuzzy. Indian finance minister Arun Jaitley said the government is working hard to eliminate the use of cryptocurrencies in illicit activities. The Central Bank of India has reiterated several times its views on the risks involving in trading volatile digital assets.
Local Crypto Exchanges Welcome the Ban
Surprisingly, HDFC’s decision has been positively received by local crypto exchanges. Rahul Raj, Founder of local exchange Koinex, stated:
“We feel it is a fair move to discourage the use of credit cards for trading in cryptocurrency because the risk of non-payment towards the bank is a pertinent issue. Even the stock market does not allow the use of credit cards to transact.”
Cryptocurrency price volatility is a major reason why lenders are halting or stopping the use of credit cards to purchase bitcoin and its crypto cousins. Even though bitcoin’s market share in the past few weeks has clawed back slightly to 40 percent now, it still remains a volatile asset in value.
However, globally cryptocurrencies are gaining popularity and several financial institutions have linked their businesses to blockchain projects, in one way or the other. It is time for Indian banks get a move on, in order to not lag behind the global trend.
Will HDFC’s decision to ban the use of credit card for buying crypto reflect on the crypto trading volume? Let us know your views in the comments section.
Images via HDFC, picserver.org