Reserve Bank of India (RBI), the central bank of the country, in a notification sent to its regulated banks and entities, has again made it clear that cryptocurrencies are not banned in India.
RBI issued a notice on Monday, May 31, clarifying its position regarding cryptocurrencies. The notice, entitled “Customer Due Diligence for transactions in Virtual Currencies (VC),” has notified other banks and regulated entities that there is no ban on cryptocurrencies in India and they should stop quoting the previous ban.
In 2018, RBI put a ban on cryptocurrencies by issuing a circular that asked entities regulated by the Reserve Bank to stop all crypto-related activities. That circular read:
“In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs. Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them, and transfer/receipt of money in accounts relating to purchase/ sale of VCs.”
The ban was challenged by the Internet and Mobile Association of India (IAMAI) in the Supreme Court of India and as Crypto Economy reported, the court took down the ban on March 4, 2020. Despite the supreme court’s ruling, banks have been citing the RBI circular when dealing with cryptocurrency.
In the latest notice, RBI has asked banks not to quote that circular as set aside by the court. The notice reads:
“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…. As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgment, and therefore cannot be cited or quoted from.”
But RBI has advised banks and other entities involved with cryptocurrencies to “carry out customer due diligence processes” such as Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT) to counter the threats imposed by users.
According to the reports, the Indian government is still working on cryptocurrency regulation. As reported, a crypto bill was supposed to be introduced in Parliament in the Budget session but it was not.
The latest reports suggest that the Indian government is reportedly looking to form a new panel of experts to bring forward a regulatory framework rather than banning cryptocurrency.
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