Blokt: National: Wednesday, June 20, 2018.
A rogue bank
in the northeastern state of Sikkim is gaining widespread popularity among
Indian crypto traders because it doesn’t fall under the purview of the Reserve
Bank of India. The apex banker forced all entities governed by it to end all
its relations with crypto-related entities through a circular on April 6, 2018.
Crypto exchanges and traders have since been looking for ways to escape the
central bank’s policy. The State Bank of Sikkim (SBS) appears as the lone
entity in the country that doesn’t answer to the RBI yet.
An RTI
Query Reveals a Safe Haven
In April,
soon after the RBI prohibited lenders from entering banking relationships with
crypto entities, a Delhi-based lawyer filed a Right to Information (RTI)
application. The answer reveals that the RBI does not govern a small
Gangtok-based bank, called the State Bank of Sikkim (SBS). The regulator has no
specific information to furnish about the existence of such an entity. However,
it noted that the SBS was formed according to the State Bank of Sikkim
Proclamation, 1968. It is not licensed under Section 22(1) of the Banking
Regulation Act, 1949.
How Did
This Happen?
The
second-smallest state of India was one of the many princely states that existed
at the time of the country’s independence in 1947. Ruled by the Chogyal dynasty
since 1642, Sikkim opted to retain monarchy but remained heavily dependent on
India. In 1950, it received a special status after a treaty that gave the state
full autonomy in all matters except frontier security.
Later, in May
1975, a political upheaval led to the accession of the state, and the monarchy
was abolished. As the banking regulation act came into force a year before, the
state was awarded special status; its rules are not binding on the bank, which
remains an autonomous entity under the Sikkim government. Its autonomy is
granted under Article 371-F of the Indian Constitution. The bank has 42
branches located in the state.
Is There a
Ray of Hope?
While the
Indian traders are becoming excited about the idea of finding a non-regulated
bank, all doesn’t seem well. Nishchal Shetty, founder, and CEO of crypto
exchange WazirX said:
“People in
the cryptocurrency community are actively talking about it and are considering
opening an account with SBS.”
However, for
trading to happen, the exchanges, as well as the traders, will need a bank
account with the lender. Unocoin founder Sathvik Vishwanathan said:
“This becomes
a problem…And then you need to have local residence proofs, etc. to open an
account.”
Now that the
traders have found an entity to circumvent the RBI regulations, it will be
interesting to see if they can utilize it or not.
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