The Reserve Bank of India has given a huge relief to crypto investors and traders by clarifying that banks and other entities cannot use its 2018 order on virtual currencies to caution their customers. This gives investors more clarity on trading in Bitcoin, Dogecoin and other popular cryptocurrencies. The central bank said that its order was set aside by the Supreme Court and cannot be cited by the banks. The clarification comes after reports suggesting that several banks are not allowing access to crypto trading platforms and had warned them against trading in digital currency.
“It has come to our attention through media reports that certain banks/ regulated entities have cautioned their customers against dealing in virtual currencies by making a reference to the RBI circular DBR.No.BP.BC.104/08.13.102/2017-18 dated April 06, 2018. Such references to the above circular by banks/ regulated entities are not in order as this circular was set aside by the Hon’ble Supreme Court on March 04, 2020 in the matter of Writ Petition (Civil) No.528 of 2018 (Internet and Mobile Association of India v. Reserve Bank of India),” RBI said in its official statement.
It further asked the banks to carry out necessary customer due diligence process in line with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT) and obligations of regulated entities under Prevention of Money Laundering Act, (PMLA), 2002.
Apart from this, the banks have also been asked to ensure compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances.”
The crypto trading platforms have been running into trouble with the banks which has led to continuous problems in money deposits and withdrawals. Major lenders like HDFC Bank and State Bank of India (SBI) had also cautioned their customers against dealing in virtual currencies such as bitcoin, according to emails sent by the lenders.
Relief for traders
There has been a lot of uncertainty around crypto trading in India. Earlier this year, a bill was proposed which aimed to impose a ban on crypto trading. There has been no update on it, but the Indian government is yet to clear its stance on cryptocurrencies. Even the RBI had hinted at bringing its own digital rupee. The latest clarification from the central bank comes as a major boost for the crypto industry which should now hope for more support from the banking system.
“This document is a ray of hope for the Indian crypto ecosystem. We really appreciate Reserve Bank of India’s clarification on this. We hope that this circular encourages banks to update their compliance teams and provide banking access to Indian crypto exchanges,” Nischal Shetty – CEO and Founder WazirX, told India Today Tech.
The RBI statement is expected to clear the confusion around crypto trading in India. While Bitcoin, Dogecoin, Ethereum and others have become household names, a lot of investors were still not clear about the legal status of crypto trading.
“We welcome the move from the RBI to clarify the stand around the old circular which was set aside by the honorable Supreme Court. I hope the confusion around the same ends now. We also respect the concern the banks may have around AML policies and discussions around the same will make the industry stronger, and investors and investments safer,” Sumit Gupta, CEO & Co-Founder, CoinDCX said.