The Reserve Bank of India (RBI) on May 31 clarified that banks and other regulated entities cannot cite its 2018 circular on cryptocurrencies as it has been set aside by the Supreme Court (SC) in March, 2020. The circular is not valid from the date of the SC order and cannot be cited or quoted from, the RBI said.
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). c.”
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.”
“This notification clearly brings in clarity that RBI hasn’t asked any bank to stop services. And doing due diligence on a business is what banks do for all the businesses,” said Nischal Shetty, founder, and CEO, WazirX.
Recently, several large private and public sector lenders have cited the RBI’s 2018 notice to caution customers from dealing in digital currencies and deny certain cryptocurrency exchanges’ services.
The RBI said it has observed that certain banks/ regulated entities have cautioned their customers against dealing in virtual currencies by making a reference to its 2018 circular.
Earlier today, several media houses reported that HDFC Bank, State Bank of India and others have warned their customers that their dealings in cryptocurrencies could result in suspension of their accounts with them.
