HDFC Bank, the largest private bank in India, has announced that it is prohibiting the use of its credit and debit cards from purchasing cryptocurrency. In a letter the bank sent to its clients on March 13, it declared that “HDFC Bank credit, debit and prepaid cards” is not permitted to be used in trading or purchasing “bitcoins, cryptocurrencies and virtual currencies”. The bank similarly issued “repeated warnings” on the “potential economic, operational, legal and security related risks associated in dealing with such currencies.”
HDFC currently commands 52% of India’s credit cards customer base. The bank’s move is set to affect its cryptocurrency users. Inc42, a tech start-up media platform, reported last year that cryptocurrency exchanges in India experienced delays that stretched for one to two days. The transaction problems began anytime terms such as “Bitcoin” or “cryptocurrency” were typed in the space for remarks. HDFC’s credit card and debit card ban comes after public sector banks in India are recovering from the largest bank scam in the nation’s history.
Specifically, Punjab National Bank is still reeling from the $1.77 billion worth of fraudulent transactions associated with a billionaire jeweller. The Reserve Bank of India, as part of the measures it has undertaken to counter future scams, halted issuing Letters of Undertaking as well as Letters of Comfort for imports’ trade credits.
HDFC’s decision is similar to Citibank India’s announcement the past month to ban cryptocurrency purchases made by its credit and debit cards. The ban was mainly due to the associated “security-related risks” related to bitcoins. A larger ban was seen on February 3 when large American financial institutions such as J.P. Morgan Chase, Citigroup, and Bank of America blocked its credit cards from purchasing virtual currencies. A few days later, the U.K.’s largest bank, Lloyds Banking Group; Canada’s largest bank, TD Bank; and Virgin Money’s branches in Australia, South Africa, and the UK, issued a similar ban. According to Shaktikanta Das, a former government official in India, digital currencies “should not be allowed at all” due to the absence of ‘effective’ ways to regulate it.