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In the latest banking news in India, notable banks were found to have cautioned their customers against dealing in virtual currencies by making a reference to the RBI circular dated April 6, 2018.
According to the 2018 circular, the RBI had banned all regulated banks from holding or facilitating cryptocurrency transactions. However, the controversial circular was set aside by the Supreme Court in 2020 following a petition by crypto exchanges and the Internet and Mobile Association of India (IAMAI).
To clarify the situation, the RBI (Reserve Bank of India) stated in a circular on Monday:
“References to the above (2018) 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 ”
Good news!
The Reserve Bank of India is directing Indian banks to stop deplatforming crypto customers. The ruling these risk-averse banks were referencing is now officially “set aside” and “no longer valid”.
Official URL: https://t.co/9DbWDb0kX0 pic.twitter.com/dC074gIqKk
— balajis.com (@balajis) May 31, 2021
While the 2018 circular has been refuted, the RBI further clarified that banks are advised to continue performing customer due diligence when dealing with Virtual Currency (VC) transactions.
Customer Due Diligence for transactions in Virtual Currencies (VC)https://t.co/iAUAx8KpRh — ReserveBankOfIndia (@RBI) May 31, 2021
Customer due diligence procedures are necessary to stay in line with KYC (Know Your Customer), AML (Anti-money Laundering), and CFT (Combating of Financing and Terrorism) regulations. Adding to this, the RBI new guidelines also state that banks dealing with cryptocurrencies need to ensure compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances.
While crypto transactions are not currently illegal in India, the government is in the process of devising regulations related to these tokens for some time.
Considering this, the clarification from the RBI comes as a relief for the crypto community, particularly after raising concerns regarding the supposed crypto ban in India. Crypto industry executives welcomed the RBI’s clarification, stating that this would encourage banks to update their take on virtual currencies and provide banking access to the Indian crypto exchange.