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The Reserve Bank of India (RBI) on Monday asked regulated entities to desist from citing or quoting from its April 2018 circular on “Prohibition on dealing in Virtual Currencies (VCs)” as it is no longer valid following the Supreme Court setting the circular aside in March 2020. The regulated entities include all Commercial and Co-operative Banks, Payments Banks, Small Finance Banks, Non-Banking Finance Companies, and Payment System Providers.
The central bank said it has come across media reports that certain banks/ regulated entities have cautioned their customers against dealing in virtual currencies by making a reference to the RBI circular on “Prohibition on dealing in Virtual Currencies (VCs)”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),” RBI said in a statement.
Also read: RBI cancels licence of Pune-based Shivajirao Bhosale Sahakari Bank
The central bank said the regulated entities 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. Further, they should ensure compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances.
Banks issue warnings
Recently, many banks warned domestic crypto currency investors about virtual currency transactions being done through their bank accounts and have said it is not permitted by RBI.
Many crypto investors tweeted that HDFC Bank has sent them a cautionary email stating that their account reflects probable virtual currency transactions, which is not permitted by the RBI based on their 2018 circular. SBI Card too has sent a similar advisory to customers and said that usage of credit cards for transaction on virtual currency merchant platforms may lead to suspension or cancellation of the credit card.
Private digital currencies/ virtual currencies/ crypto currencies (CCs) have gained popularity in recent years. RBI is exploring the possibility as to whether there is a need for a digital version of fiat currency and in case there is, then how to operationalise it.
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