The Reserve Bank of India (RBI) on Monday clarified that banks and other entities cannot cite its 2018 order on virtual currencies as it has been set aside by the Supreme Court of India in 2020.
"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)," the central bank said in a notification.
"Banks, as well as other entities, may, however, continue to carry
out customer due diligence processes 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 in addition to ensuring compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances," RBI added.
According to Nischal Shetty, CEO and Founder, WazirX, 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,” he said.
Avinash Shekhar, Co-CEO at ZebPay also welcomed the step and called it positive news for the entire crypto industry—businesses, stakeholders, and investors.
“Investing in crypto has always been 100 percent legal in India and the new RBI circular clearly confirms the right to do business with crypto firms. This is a welcome move to make crypto investments accessible to more Indian investors,” he added.
"With the announcement by RBI, it is certain that the dying crypto market is back to life. Although there has been no regulatory response from the Indian government, the number of investors in cryptocurrency has soared rapidly over the past few years. Ironically, India has been promoting digitalisation by its endeavour of Digital India but has been resisting this technological development, but it is about to time, the Indian government familiarises itself with this development of technology as without it, the Indian economy would definitely be losing its opportunity for marking its presence in this cryptic environment," further said Sonam Chandwani, the Managing Partner at KS Legal & Associates.
First Published: IST