In a surprising yet positive stance on cryptocurrencies, the Reserve Bank of India (RBI) on May 31 clarified that banks and other regulated entities cannot cite its 2018 circular on cryptocurrencies as it has been set aside by the Supreme Court (SC) in March, 2020. The circular is not valid from the date of the SC order and cannot be cited or quoted from, the RBI said.
This clarification comes in the light of recent investor communication by various banking entities like HDFC, SBI, which cited 2018 circular and intended to alert them of the “uncertain regulatory landscape” of this space. Investors were asked to clarify the nature of these transactions and be aware of the risks associated with crypto and virtual currencies. The mails sent out by these banks in this regard also stated that failure to do so could mean permanent closure of bank accounts and suspension of credit cards.
What does this circular mean for the investors?
WazirX, one of India’s largest cryptocurrency exchanges, welcomed this move. Nischal Shetty, CEO, Wazir X hailed it as a positive sign, saying that “this document is a ray of hope for the Indian crypto ecosystem. We really appreciate the Reserve Bank of India’s clarification on this. We hope that this circular encourages banks to update their compliance teams and provide banking access to Indian crypto exchanges.”
Given how vague and grey cryptocurrency regulation remains in India, most banks had started disassociating themselves with cryptocurrency exchanges like Coin DCX, WazirX, and more. More recently, Paytm also severed ties with WazirX, leaving many crypto investors unable to deposit or withdraw money from their accounts linked with the payment behemoth.
“RBI’s statement to banks on cryptocurrency investments clears their position on whether customers are legally allowed to invest in crypto. Instead of denying service to their customers based on an invalidated circular, it is time banks came onboard the crypto investment bandwagon, allow the crypto exchanges to hold accounts with them, and enable customers to make investments via all possible options, including UPI and bank transfers. Cryptocurrencies are the future and we must ensure we stay at the forefront of this technology”, emphasises Ashish Singhal, CEO, Coinswitch Kuber.
With RBI green signaling the trade of cryptocurrencies and more and more companies and individuals embracing cryptocurrency and the underlying applications of blockchain, a formal regulation for the sphere is not a far-fetched dream anymore. As the country looks forward to greater financial inclusion and participation, it is imperative that there is a conducive atmosphere built to facilitate the same.
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