Indian traders are celebrating the latest partial victory in their long-running feud with commercial banks over digital currency treatment in the country. The Reserve Bank of India recently clarified that digital currencies aren’t banned in India. Banks must therefore not refer to an outdated memorandum to deny their Bitcoin clients services.
Back in 2018, the RBI issued a memorandum prohibiting banks from processing digital currency transactions. The community was up in arms almost immediately. In the years that followed, the two factions would be locked up in a legal battle that made it all the way to the Supreme Court. The apex court backed the digital currency community, ordering commercial banks to process Bitcoin-related transactions.
However, as the RBI revealed in its latest statement, some banks have still been using the overturned circular to deny customers service.
“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. As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from,” the RBI stated.
The regulator also urged banks to continue carrying out due diligence before serving digital currency users. They must observe AML, CFT and KYC guidelines in addition to ensuring compliance with relevant provisions under the Foreign Exchange Management Act for overseas remittances.
The statement by the RBI is in great contrast to many of its previous messages about the industry. Two weeks ago, Reuters reported that the regulator had been warning local banks to cut all ties with the industry.
According to many local reports, as well as social media posts, many banks have been denying digital currency users services, quoting the outdated circular. Digital currency users have continued to receive threats of account closure.
In one such email from HDFC Bank, it states, “RBI has also highlighted that regulated entities shall not deal in virtual currencies or provide services for facilitating any person or entity in dealing with or settling VCs and banks need to exit relationships with such customers.”
@HDFC_Bank I received an email threatening withdrawal of banking services because I purchased some crypto. Email cites 2018 RBI guidelines which were quashed by Supreme Court last year. Given crypto being deliberated by law makers, is this not harassment? pic.twitter.com/E3CAPx7hL4
— Sanat Mehrotra (@sanatmehrotra) May 28, 2021
The clarity from the RBI will thus go a long way in ensuring digital currency users can access banking services. Nischal Shetty, the CEO of WazirX exchange commented, “It’s amazing to see RBI clarifying and helping solve uncertainty for Crypto in India. There are over 1.5 crore Indians in Crypto. This news has brought joy and confidence to everyone in the sector. Let’s continue to build the Indian crypto ecosystem.”
Other leaders reiterated this message, with CoinDCX exchange founder Sumit Gupta remarking, “We welcome the move from the RBI to clarify the stand around the old circular which was set aside by the honorable Supreme Court. I hope the confusion around the same ends now.”
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