India's HDFC Bank Calls Bitcoin a Fad as Exchanges Mull Legal Fight Over Restrictions

HDFC noted a link between bitcoin prices and searches on Google.

May 28, 2021 at 2:03 p.m. UTC
Updated Sep 14, 2021 at 1:03 p.m. UTC

HDFC Bank, India's largest private lender, said bitcoin and other cryptocurrencies are a fad and too volatile to gain mainstream acceptance.

"The strong correlation between bitcoin prices and Google searches indicates that it is perhaps more of a fad," the bank said in a treasury report titled "Cryptocurrencies: Fad or Forever?" published May 27. "The bottom line is that it seems to be highly speculative."

Many private lenders, including ICICI Bank, the second-largest, have stopped serving local crypto exchanges. According to some reports, the Reserve Bank of India (RBI) has been encouraging banks to reduce ties to the exchanges.

The Economic Times reported Friday that the exchanges are planning to ask the Supreme Court for a directive on whether the central bank can ask private lenders to shut down payment gateways to merchants associated with cryptocurrency trading.

The court set aside the RBI's two-year-long banking ban on crypto exchanges in March 2020. The government has yet to clarify regulations, meaning that cryptocurrency trading is still legal in India.

According to HDFC Bank, the regulatory uncertainty will subside, bringing more investments into cryptocurrencies. While interest in the topic is often driven by "transient bouts of intense interest," cryptocurrencies are likely to remain available, and bitcoin has properties of being a good hedge from the perspective of portfolio diversification, it said.

The lender also discussed the role of a central bank digital currency in promoting financial inclusion and reducing the cost of managing and transferring cash within the country and across borders. "The virtual currency will be backed by a suitable amount of monetary reserve like gold or foreign currency reserves."

The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which seeks to prohibit all cryptocurrencies in India and provide a framework for creating an official digital currency to be issued by the RBI, has yet to be brought before parliament.

The Festival for the Decentralized World
Thursday - Sunday, June 9-12, 2022
Austin, Texas
Save a Seat Now

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Trending

1
CoinDesk - Unknown
First Mover Asia: KuCoin Plans to Bolster DeFi Activity on Its Blockchain After $150M Raise; Cryptos Gain

The crypto exchange will add technical features to support developers and build on KuCoin's public blockchain; bitcoin outperforms ether.

The crypto exchange will add technical features to support developers and build on KuCoin's public blockchain; bitcoin outperforms ether.

CoinDesk - Unknown
2
CoinDesk - Unknown
CFTC Charges 2 Men With Running a $44M Crypto Ponzi Scheme

Sam Ikkurty and Ravishankar Avadhanam are accused of using YouTube videos to dupe would-be clients into investing in various crypto funds.

Sam Ikkurty and Ravishankar Avadhanam are accused of using YouTube videos to dupe would-be clients into investing in various crypto funds.

CoinDesk - Unknown
3
CoinDesk - Unknown
Avalanche Says Luna Foundation Guard Has 'Disclosed No Plans' for AVAX Tokens

Avalanche, the smart-contracts blockchain, says it is ready to work with Luna Foundation Guard on a “sensible trading strategy” if the tokens were to be sold.

Avalanche, the smart-contracts blockchain, says it is ready to work with Luna Foundation Guard on a “sensible trading strategy” if the tokens were to be sold.

CoinDesk - Unknown
4
CoinDesk - Unknown
Coinbase Outlines Cost-Cutting Measures, Employee Grants Amid Weak Results and Crypto Rout: Report

The report based on internal emails seen by The Information comes after Coinbase said earlier this week it will slow hiring.

The report based on internal emails seen by The Information comes after Coinbase said earlier this week it will slow hiring.

CoinDesk - Unknown