New Delhi: on May 31, the Reserve Bank of India issued a circular that offered some clarification towards the official state of cryptocurrencies in India. After widespread reports claimed that both private and public sector banks have been actively advising users against investing in cryptocurrencies, while withdrawing payment support for Indian crypto trading platforms, the RBI circular underlined that banks can no longer prevent users from making crypto investments by citing 2018 circular. However, the circular may not be viewed as a direct endorsement of cryptocurrencies by the central bank, therefore still leaving the Indian crypto space wide open for an official regulatory framework, which cannot arrive soon enough.
What the RBI circular Really says
In the circular, RBI’s chief general manager, Shrimohan Yadav states, “References to the (old) circular by banks/ regulated entities are not in order, as it was set aside by the Hon’ble Supreme Court on March 4, 2020. As such, the circular is no longer valid from the date of the Supreme Court judgment, and therefore cannot be cited or quoted from.” However, it is important to note that while the clarification is certainly of value, the RBI has left room open for banks to take their own call by not mandating that not complying with cryptocurrency trading platforms and wallets in India would go against the law.
In the RBI circular, Yadav has further added, “Banks (and NBFCs) may continue to carry out due customer diligence processes, in line with regulations governing standards for Know Your Customer, Anti-Money Laundering, Combating of Financing of Terrorism and obligations of regulated entities under Prevention of Money Laundering Act, 2002 – in addition to ensuring compliance with relevant provisions under Foreign Exchange Management Act for overseas remittances.”