India’s central bank clears ambiguity over crypto regulations in the country.
Banks Can’t Advise Against Trading in Crypto
In a tweet posted today, the Reserve Bank of India (RBI) cleared clouds of confusion regarding the regulatory nature of cryptocurrencies in India.
Customer Due Diligence for transactions in Virtual Currencies (VC)https://t.co/iAUAx8KpRh
— ReserveBankOfIndia (@RBI) May 31, 2021
According to the circular tweet by the RBI, no bank in India can caution its customers against dealing in crypto assets citing an old 2018 circular that was successfully overturned by the Supreme Court of India in March 2020.
For the uninitiated, in March last year, the Supreme Court of India quashed the RBI’s 2018 diktat that prohibited banks and other financial institutions in the country from dealing in virtual currencies.
However, of late, despite the Supreme Court of India’s verdict, several Indian banks continue to make life tough for their crypto-enthusiast customers by sending them notices of account closure should they not stop trading cryptocurrencies.
“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 dated April 06, 2018,” the RBI said in a circular released Monday. “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 4, 2020.”
The statement adds:
“As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from.”
Practice Due Diligence
While the RBI’s circular brings a sigh of relief for the Indian crypto community, it adds that banks would be required to carry out customer due diligence processes to be compliant with existing regulations such as KYC, AML, combating of financing of terrorism, and the Foreign Exchange Management Act (FEMA) for foreign remittances.
Despite the typical anti-crypto stance shown by India, recent developments in the country show signs of positivity and the possibility of a conducive regulatory environment for digital assets.
In recent news, BTCManager reported that India’s former finance secretary Subhash Chandra came out to state that instead of overlooking the crypto industry, the Indian government must find ways to efficiently regulate it.