Crypto bank takes co-operative route to set up India operations

Cryptocurrency bank Cashaa’s decision to take the credit co-operative society route to launch banking operations in India for customers of virtual currencies raises several issues, according to a report.

Cashaa has launched Unicas – a joint venture between Cashaa and United – which claims to be the world’s first crypto-friendly financial institution with physical branches in India, in partnership with the United Multistate Credit Co-operative Society.

The company will offer personal accounts services in India, including savings accounts for Indian rupees and cryptocurrency, loans for buying virtual currency, lending against cryptocurrency and card services.

The Supreme Court order struck down the Reserve Bank of India (RBI) ban on cryptocurrency last year, but banks continue to warn customers against using their services to trade in virtual currencies.

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“Recently, Indian banks appear to be cracking down on crypto and exchanges even though India hasn’t formally banned cryptocurrencies. Indian crypto exchanges are struggling to keep fiat coming in as banks are halting transfers to crypto-related accounts. As a result, these exchanges are now turning to Cashaa to maintain their fiat services,” Cashaa noted.

Asked whether the firm has sought the RBI’s permission to launch a “bank”, Cashaa Chairman Kumar Gaurav said United is a multistate credit co-operative society. “As we give services to members only, we do not need the RBI’s permission for this model. United is also a member of the National Federation of Urban Co-operative Banks and Credit Societies Ltd (NAFCUB) vide membership No. 1753 and certified with ISO 9001:2008 for Quality Management Systems,” he told The Indian Express.

A credit co-operative society is not permitted to operate banking businesses. Instead it lends money only to its members. “This society doesn’t come under the RBI. The promoters of the so-called bank are taking the credit co-operative route to avoid strict regulation and monitoring of the RBI. They won’t get a banking licence from the RBI. However, this society can lend to its members. It can still create a systemic risk to the financial system,” a banking source told The Indian Express.

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“I think opening a credit co-operative society or providing services through them is an easier route as compared to going through private banking services. I am sure they would have some sort of limitations for customers on the banking side. That would be interesting to watch out for,” Hitesh Malviya, founder, itsblockchain.com, told the newspaper.

“As Unicas is part of Cashaa, we are working towards the future of banking in India. We are releasing personal accounts in India powered by CAS tokens with features such as saving account for the Indian rupee and crypto as well as lending (loan against crypto and loan to buy crypto),” Gaurav said.

“We will be coming to India next month [in August]. We will be launching personal bank accounts so that personal traders can do peer-to-peer trading. Cryptocurrency traders will be able to transact without fear of their bank accounts being frozen,” Gaurav said.

The RBI has warned people against virtual currencies several times, but is planning to launch its own digital currency. “Central bank digital currency is a work in progress. The RBI team is working on it, technology side and procedural side… how it will be launched and rolled out,” RBI Governor Shaktikanta Das said recently.