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Leading cryptocurrency exchanges, including WazirX and CoinSwitch Kuber, have suspended rupee deposits for new users on their platforms after some banks severed ties with them citing an informal guidance from the Reserve Bank of India.

The regulator’s move has come despite the Supreme Court in March last year quashing a ban on crypto related payments.

The central bank has informally told lenders to stay away from businesses dealing in cryptocurrencies, though there is no official communication in this regard, said a banker, on condition of anonymity.

As RBI is the regulator, banks have decided to go with what it says and wait for clarity on the Supreme Court order, the banker said. The central bank did not respond to a request for comment.

“This lack of clarity, which is coming through RBI, is hurting the crypto industry. There are multiple paths that we have been exploring because we believe in talking to the banks directly. However, if the entire industry gets cut off, we might have to take the legal route," said the chief executive officer of a cryptocurrency exchange, seeking of anonymity.

New users are not able to deposit rupees on their platform as their banking partner is unable to create new virtual accounts, according to WazirX, which is one of the exchanges impacted. “Unfortunately, this is an industry-wide issue and all Indian crypto exchanges are facing a limitation in rupee deposits right now. We are working on adding more banking partners to support the increasing volume of INR deposits," said Nischal Shetty, CEO, WazirX.

The problem comes at a time when the crypto industry has been witnessing a boom in terms of new users and volumes since the start of the year. There are more than 10 million crypto investors in India with total holdings worth over $1 billion, according to industry estimates.

Many crypto exchanges have faced issues in securing banking support with lenders such as ICICI Bank and Yes Bank limiting exposure to the industry. Yes Bank had stopped dealing with the crypto industry even before RBI’s guidance.

“ICICI Bank has changed its stance. There are other banks as well that are saying they don’t want to provide services to the cryptocurrency industry because they are considering it to be a risky industry for the time being," said Sathvik Vishwanath, co-founder and CEO, Unocoin.

The crypto industry’s main concern is that more banks might take such a stance, said Vishwanath. “This could leave the industry again in the dark," he said.

For now, some of the exchanges have moved to payment gateways and aggregators to enable deposits. BuyUcoin, for instance, which was earlier connected via Yes Bank for deposit service, has shifted to Paytm Payments Bank.

“The problem has been resolved for now, but I don’t for how long. The situation is critical for the crypto industry. There are a few banks working, but we don’t know when they are going to take out their support," said Shivam Thakral, CEO, BuyUcoin.

Some feel that the problem will largely be resolved if there is reaffirmation from RBI, even as exchanges struggle to keep up with heavy volume load in the view of the volatility in cryptocurrencies.

“We have no reason to believe that banks are anti-crypto. After the SC decision last year, banks were calling us within two hours to explore business opportunities. That hasn’t really changed," said Vikram Rangala, chief operating officer of ZebPay.

Shayan Ghosh contributed to this story.

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