In April 2018, the Reserve Bank of India (RBI) asked local banks to stop providing services to cryptocurrency exchanges and related businesses, subsequently halting fiat-to-crypto trading in the country. Since then, many Indian exchanges have been struggling to keep up their payment channels as the banks sever ties with them despite the Supreme Court ruling against RBI and lifting the ban.
India, the world’s second-most populous country after China, often makes headlines for its attempts to outlaw crypto, real or rumored. The mixed signals sent by the authorities in the country are keeping some Indians from adopting bitcoin. However, a reassuring signal has come from the RBI which clarified on May 31 that there is presently no ban on banking institutions providing services to crypto firms.
The RBI indicated that it is aware of media reports that some banks are warning their customers against using their services for cryptocurrency trading by referencing the central bank’s quashed circular dated April 2018.
“Such references to the above circular by banks and regulated entities are not in order as this circular was set aside by the Hon’ble Supreme Court on March 4, 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 As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from.”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 RBI’s clarification comes after reports that some of India’s top banks including HDFC, SBI Card, and State Bank of India have warned their customers against conducting crypto-related transactions citing the RBI’s 2018 order which prohibited banks from servicing crypto exchanges.
In its Monday statement, the RBI has advised banks to undertake the necessary AML and KYC compliance.
“Banks, as well as other entities addressed above, 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 in addition to ensuring compliance with relevant provisions under Foreign Exchange Management,” the statement explained.
It should be noted that RBI’s latest statement only clarifies that the central bank has not asked banks to stop providing services to crypto exchanges. It does not clearly ask banking institutions to reinstitute services to cryptocurrency exchanges.