NEW DELHI: In a major relief to crypto enthusiasts, the Reserve Bank of India (RBI) on Monday clarified that banks cannot shun transactions citing its 2018 circular since it is no longer “valid”. The clarification comes in the wake of banks denying services to customers dealing with virtual currencies. Some, including HDFC Bank and State Bank of India (SBI), have even warned users of account suspension if trading continues.
“The 2018 circular (on cryptocurrencies) was set aside by the Supreme Court on March 4, 2020. As such, the circular is no longer valid from the date of the judgement, and therefore cannot be cited or quoted from,” the RBI said in a circular. The regulator, however, advised banks to continue doing due diligence of customers on any crypto-related dealings along with ensuring compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances.
Over the past one month, several financial institutions including ICICI Bank and Paytm Payments Bank have cut ties with crypto exchanges and blocked the exchanges’ ability to accept rupee deposits in the absence of a clear directive from RBI on the Supreme Court verdict. Industry experts say that the clarification from none other than the regulator will enable lenders to engage with the crypto industry.
“The entire crypto community is relieved. Banks have been on the fence whether they should service the crypto industry or not. But now, we hope that this circular encourages banks to update their compliance teams and provide banking access to Indian crypto exchanges,” said Nischal Shetty CEO and Founder of India’s largest cryptocurrency bourse, WazirX.
Even as the RBI and the government have not formed an opinion on the cryptocurrencies, there are many Indians who have taken exposure in the ever-growing crypto market. Data collated from crypto exchanges estimate roughly 1.6 crore Indians to have invested in cryptocurrencies holding Rs. 15,000 crore. Wazir X alone claims to have nearly 20 lakh active users.
The central bank asked banks to carry out the necessary customer due diligence process 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. “We respect the concern the banks may have around AML policies and discussions around the same will make the industry stronger, and investors and investments safer,” said Sumit Gupta, CEO & Co-Founder, CoinDCX.