RBI notifies that its 2018 circular banning local banks from establishing ties with crypto businesses is no longer valid after the Supreme Court circular released in March 2020.
On Monday, May 31, the Indian central bank – Reserve Bank of India (RBI) – issued a circular asking all local banking institutions not to quote its 2018 circular to restrict crypto trading activities at their end. This circular came following complaints from many crypto traders earlier on Sunday.
Crypto Trading in India
Some of the top banking institutions in India restricted fund flows to crypto exchanges. The institutions cited a 2018 circular from RBI that issued a liquidity ban for crypto traders. However, in March 2020, the Supreme Court of India lifted the ban after no explanation from RBI.
As the crypto trading activity in India has surged over the last year, banks have been staying cautious. But clearing the air, RBI released its clarification stating:
“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 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 4, 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 As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from”.
This is certainly a welcome development from the Indian central bank. It also hints that the next set of regulations could be somewhat crypto-friendly.
Investors Rejoice After the RBI Circular
It has certainly been a sigh of relief for the Indian crypto investors who have been on a regulatory roller-coaster over the last few years. ZebPay CEO Avinash Shekhar thinks that this clarification will bring more investors to the crypto market. Speaking to Bloomberg, Shekhar further added:
“Investing in crypto has always been 100% legal in India and the new RBI circular clearly confirms the right to do business with crypto firms”.
However, in its recent circular, the RBI has said that the banks should follow AML and KYC rules strictly. They should follow the due diligence as per the regulatory measures of the RBI. Sumit Gupta, CEO and co-founder of crypto exchange CoinDCX said that RBI’s concerns with money laundering will help to boost the industry thereby making it safer and stronger.
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.