RBI Says Banks Can't Quote 2018 Circular to Restrict Crypto Transactions

In a relief for the crypto community, the Reserve Bank of India (RBI) issued a clarification on Monday stating the commercial banks cannot quote its now-invalid April 2018 crypto banking ban to deny services to customers involved in digital assets dealings.

"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," the RBI said in a circular released Monday. "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"As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from," the statement added.

The RBI's clarification comes amid reports that country's top lenders – State Bank of India and HDFC Bank – are sending reports to certain clients, inquiring about their virtual currency transactions and warning of cancellation or suspension of their cards, citing RBI's 2018 circular, which prohibited lenders from serving crypto exchanges,

However, the Supreme Court quashed the banking ban in March 2020, bringing cheer to Indian investors and local exchanges. Even so, in recent weeks, several private lenders have shut down payment gateways to merchants involved in cryptocurrency dealings, causing disruption at local exchanges.

Also read: India’s HDFC Bank Calls Bitcoin a Fad as Exchanges Mull Legal Fight Over Restrictions

The RBI's latest statement only makes clear that the central bank hasn't asked lenders to stop providing services to exchanges. It doesn't explicitly ask banks to restore services to crypto exchanges and says lenders should ensure necessary compliance.

"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," the circular said.