The Reserve Bank of India (RBI) in a new notice published today has renounced its earlier circular that barred local banks from providing services to individuals and companies dealing with cryptocurrencies.
The circular issued back in April 2018 noted that banks would be subjected to punishment if they offered services to crypto-related entities. To be clear, the 2018 circular was set aside by the Indian Supreme Court in March last year after affected exchanges won a legal battle in that regard.
However, the lack of a clear statement from RBI acknowledging the Supreme Court’s decision has led to many local banks still flagging crypto-related transactions as well as blocking the accounts of associated individuals.
The latest RBI notice addressed those concerns, saying it has noticed through media reports that local banks are still using the dismissed circular as a basis for cautioning customers against dealing with cryptocurrencies. To that respect, the RBI notice signed by General Manager Shrimohan Yadav stated:
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). As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from.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 clearly frees local banks to provide services to cryptocurrency exchanges as well as their customers. This would also mean that Bitcoin is now legal in India and customers can freely transfer funds to exchanges via their bank accounts, and possible credit and debit cards.
But that would not be without banks conducting due diligence and abiding with Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT) rules governing financial institutions in the country.