The clarification came after leading banks such as HDFC Bank and the State Bank of Indian in the past few days cautioned their customers through emails against dealing in virtual currencies such as bitcoin citing the circular
The Reserve Bank of India (RBI) on Monday clarified that its 2018 order directing lenders to stop dealing in virtual currencies was quashed by the Supreme Court in March last year and can’t be cited by banks to deny services to people dealing in cryptocurrencies.
The clarification came after lenders such as HDFC Bank Ltd and State Bank of India cautioned customers through emails against dealing in virtual currencies such as bitcoin, citing the circular.
While HDFC Bank requested customers, who have received the email, to visit the nearest branch within 30 days to clarify the nature of these transactions, SBI warned its clients that the usage of its credit cards for transactions on virtual currency merchant platforms may lead to the suspension or cancellation of these cards.
“It has come to our attention through media reports that certain banks or 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 6 April 2018," RBI said in a notification. “As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court ruling and, therefore, cannot be cited or quoted from," the notification added.
Over the past few weeks, cryptocurrency exchanges, as well as investors, have been facing issues related to banking services after some lenders severed ties with the industry.
The crypto industry has been requesting RBI to provide clarification on the circular. “We welcome the move from RBI to clarify the stand around the old circular, which was set aside by Supreme Court. I hope the confusion around the same ends now. We also respect the concern the banks may have around AML (anti-money laundering) policies and discussions around the same will make the industry stronger and investors and investments safer," said Sumit Gupta, CEO, CoinDCX.
Earlier this month, RBI informally asked banks to stay away from businesses dealing in cryptocurrencies. ICICI Bank, Yes Bank and Paytm Payments Bank are among those that have severed ties with the sector, according to crypto exchanges.
Meanwhile, RBI has asked lending institutions to continue with customer due diligence processes.