The Reserve Bank of India (RBI) on Monday set aside a 2018-era ban on trading in cryptocurrencies, after several investors complained that leading banks across the nation were prohibiting them from dealing on crypto exchanges.
In a circular issued on Monday evening, India's top federal bank said that its 2018 order banning the trade of digital currencies was "no longer valid", noting that cryptocurrency trade ban had already been set aside by the country’s Supreme Court last year.
“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),” said the federal financial institution.
“As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from,” it added.
The RBI order comes against the backdrop of media reports claiming many leading banks have been warning Indian investors about the perils of trading in cryptocurrency, also advising them that it is against Indian law.
According to media reports, top lenders such as the HDFC Bank and the government-controlled State Bank of India (SBI) have sent emails advising investors against dealing in virtual currencies.
Several other private lenders such as ICICI Bank and Yes Bank have reportedly completely barred customers from operating on crypto exchanges.
The federal bank’s Monday order added that although cryptocurrency trade isn't banned as such, banks are still obliged to carry out the “due diligence” process of interested customers, in line with Indian banking law. The federal banking regulator also cautioned that banks must ensure that proceeds from cryptocurrency trading are not used to launder money or finance terrorism, among other things.
Over 10 million Indians are estimated to be involved in trading cryptocurrencies, per media reports. Despite recording a strong interest from Indian investors, Prime Minister Narendra Modi’s government has been cautious on cutting-edge digital finance.
The federal finance ministry in 2017 stated that it did not consider cryptocurrency a “legal tender or coin”, adding at the time that it would take all measures to eliminate the use of crypto assets in used in the financing of “illegitimate activities”.
The finance ministry statement was followed by a ban on the trading of digital currencies in the country by the Reserve Bank of India. The RBI ban, however, was only set aside last year after many aggrieved crypto investors approached the country’s top court for relief.