The RBI on 31st May clarified that banks could not use the 2018 circular on cryptocurrencies as the Supreme Court had canceled it out in March 2020. Therefore, the circular is deemed invalid from the date when SC set aside the ruling and cannot be used or quoted from the banking and financial institutions. This was a welcome announcement as the traders and market analysts waited for an official statement to clarify the take on cryptocurrencies within the country since banks had taken the matter into their own hands.
After clarification, the Central bank has asked the banks to carry out all the necessary precautions to ensure no missed transactions and illegal activities while dealing in cryptocurrency transactions. The Banks have to process KYC, combating financial terrorism, anti-money laundering, and prevention of money laundering obligations to ensure that all cryptocurrencies being carried out in the country are purely linked to traders and investors in the cryptocurrency trade for making profits along the way. Recently, HDFC bank and the State Bank of India had started circulating warnings on the use of their banking services for activities related to cryptocurrency trade, citing the 2018 RBI circular. The bank’s notices even said that the account holders would not be able to access any of the bank’s services, and the account will be temporarily ceased until they visit the bank branch and clarify the use.
Sandeep Naliwal, the Co-founder of Polygon, has welcomed this circular, saying that this is a positive step towards widespread use of digital currencies, and prevents the regulatory authorities and government bodies from acting as a barrier to growth opportunities in the cryptocurrency ecosystem. According to reports, more than 1.5 crore Indians have invested in cryptocurrencies amounting to close to 15,000 crores. Three hundred fifty startups have developed their apps that work in blockchains and cryptocurrencies. However, almost all of these applications have had significant issues with banks denying supporting their payment systems increased over the last few weeks. This had led to a lot of panic among the investors and traders, leaving them in a position where they could not even trade these cryptic values at all, even when suffering significant losses.
With the clarification on future support on cryptocurrencies validated by RBI’s notice, the traders and investors in India have taken a sigh of relief. The RBI is still not in favor of adapting cryptocurrency as a medium of payment; however, the government’s take on the issue is still in the works. The bill citing all cryptocurrency-related activities is still to be introduced in the parliamentary sessions come.