The global demand for cryptocurrency investments is increasing. However, the state of cryptocurrencies in India remains hazy. It is mainly due to the lack of a set of regulatory laws for the crypto space in India and partly because the private banks in India discourage crypto investments by citing a 2018 circular by the Reserve Bank of India (RBI). Now, as per a recent circular by the RBI, Banks can no longer rely on the 2018 circular to prohibit cryptocurrency trading in the country.
For those who are unaware, the RBI banned cryptocurrency trading in India in 2018 in order to create a central digital currency. Since then, private banks have used the 2018 RBI circular to discourage customers from investing in cryptocurrencies.
However, the RBI’s recent circular clarifies that banks can no longer use its 2018 circular to discourage crypto investments in the country. The previous circular, which prohibited cryptocurrency trading by regulated entities in India, was “set aside” by the Supreme Court last year, according to RBI Chief General Manager Shrimohand Yadav.
“As a result, the circular is no longer valid as of the date of the Supreme Court decision, and thus cannot be cited or quoted from,” Yadav said in a statement.
Although the current RBI circular states that banks cannot discourage crypto investments by citing the 2018 RBI circular, banks are free to make their own decisions when it comes to supporting crypto investments in the country.
“Banks (and NBFCs) may continue to carry out due customer diligence processes in accordance with regulations governing standards for Know Your Customer, Anti-Money Laundering, Combating Terrorist Financing, and obligations of regulated entities under the Prevention of Money Laundering Act, 2002 – in addition to ensuring compliance with relevant provisions under the Foreign Exchange Management Act for overseas remittances,” Yadav further added.