Several banks are using this circular to influence their users against cryptocurrencies.
Cryptocurrency exchanges have welcomed the choice.The Federal Reserve Bank of India (RBI) has issued a circular to banks and other regulated entities clarifying that its 2018 circular on cryptocurrencies is not any longer valid because it was put aside by the Supreme Court in March 2020.
“As such, insight of the order of the Hon’ble Supreme Court, the circular is not any longer valid from the date of the Supreme Court judgment, and thus can’t be cited or quoted from,” said the circular from the financial institution.
This is in response to users being warned by banks to avoid cryptocurrencies citing the circular. Many leading banks in India were reportedly misleading their customers, essentially misusing RBI’s name and its quashed circular to stop their customers from using their money for an activity that’s legal.
To recall, in 2018, the Supreme Court had quashed a circular that barred RBI-regulated entities from “providing any service in reference to virtual currencies, including those of transfer or receipt of cash in accounts concerning the acquisition or sale of virtual currencies”.
The Supreme Court quashed this circular, stating that since the RBI had not banned virtual currencies, which the Indian government has not received a choice yet, the informal ban placed by RBI doesn’t hold merit.
Cryptocurrency exchanges like WazirX, Unocoin, Giottus, among others, are adversely suffering from the informal ban from the banks’ side.
Nischal Shetty, the founder and chief military officer (CEO) of WazirX, welcomed the news.
“This document may be a ray of hope for the Indian crypto ecosystem. we actually appreciate the Federal Reserve Bank of India’s clarification on this,” he said.
Further, Shetty said that he hopes this may allow his company to access banking services again. “We hope that this circular encourages banks to update their compliance teams and supply banking access to Indian crypto exchanges,” he said during a statement to Business Insider.
Sumit Gupta, co-founder, and CEO of CoinDCX, “We welcome the move from the RBI to clarify the stand round the old circular which was put aside by the honorable Supreme Court. I hope the confusion round the same ends now. We also respect the priority the banks may have around AML [anti-money laundering] policies and discussions round the same will make the industry stronger, and investors and investments safer.”