The latest directive comes against the backdrop of some banks and regulated entities citing the circular and cautioning customers against dealing in virtual currencies
The Reserve Bank of India(RBI) today clarified that banks and other entities cannot cite its 2018 order on virtual currencies as it has been set aside by the Supreme Court of India in 2020. The clarification from the central bank will come as a sign of relief for all investors and crypto exchanges in India who invested in virtual currencies.
RBI in a notification said , "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 in the matter of Writ Petition (Civil) No.528 of 2018 (Internet and Mobile Association of India v. Reserve Bank of India)."
The Central Bank further added, "Banks, as well as other entities addressed above, may, however, continue to carry out customer due diligence processes 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 in addition to ensuring compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances."
The latest directive comes against the backdrop of some banks and regulated entities citing the circular and cautioning customers against dealing in virtual currencies.
The circular, issued on Monday, is addressed to all commercial and co-operative banks, payments banks, small finance banks, NBFCs and payment system providers.
Earlier, HDFC Bank and State Bank of India (SBI) have cautioned their customers against dealing in virtual currencies such as bitcoin, according to emails sent by the lenders.
Private digital currencies/ virtual currencies/ crypto currencies have gained popularity in recent years. In India, the regulators and governments have been sceptical about these currencies and are apprehensive about the associated risks, RBI had said in its Booklet on Payment Systems issued in January 2021.