A new official notice published by the Reserve Bank of India (RBI) has positively impacted crypto enthusiasts in India as the central bank pointed out that a previous circular preventing banks from making business with crypto industries is no longer valid.
The notice was addressed to all commercials and cooperative banks, payment banks, small finance banks, and other financial institutions on Monday 31st as a result of media reports about certain entities cautioning customers against virtual currencies based on a previous circular.
The RBI circular referred by the notice was originally published on April 06 of 2018 and was titled “Prohibition on dealing in Virtual Currencies (VCs)”. It prohibited all entities regulated by the reserve bank from dealing with or providing services involving any form of virtual currencies.
This forced any entity that was providing such services to stop during the following 3 months.
The circular, which had been cited by some of the country’s biggest banks when cautioning users about Virtual currencies, was later overturned by India’s Supreme Court in 2020. T
he RBI told financial institutions that as a result of the supreme court’s decision, the circular is not only valid but also can’t be cited or quoted from.
The RBI also noted that regulated financial institutions were still able to carry out customer due to diligence processes based on governing standards.
These standards cover 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.
RBI Move Floods Indian Crypto Industry With New Optimism
Despite the increasing uncertainty around the future of the cryptocurrency industry in the world’s 5th largest economy, the news was received with optimism by crypto leaders in the country.
Sumit Gupta, Co-founder, and CEO at CoinDCX, referred to the news by tweeting:
“This is great news directly coming from RBI. RBI clarified the stand around the old circular which was set aside by the honorable Supreme Court. Simply put this is a testament, that banks cannot stop people from investing in crypto.”
The hashtag “IndiaWantsCrypto” was trending in the country soon after the news made it through the country, reflecting the increasing pressure government institution are experiencing when it comes to allowing cryptocurrency companies to operate under a legal framework.
This is great news directly coming from RBI. RBI clarified the stand around the old circular which was set aside by the honorable Supreme Court.
Simply put this is a testament, that banks cannot stop people from investing in crypto. pic.twitter.com/VVGRp1SV1T
— Sumit Gupta (CoinDCX) (@smtgpt) May 31, 2021
The uncertainty around the legal status of cryptocurrency in the country is also shared by crypto enthusiasts around the world, as the increasing popularity of crypto has increased regulators’ concerns about the implications of widespread adoption.
The Regulatory Landscape In India
Back in February of 2021, the Indian Crypto industry received with concern the news concerning the introduction of legislation that could result in a widespread ban of cryptocurrencies in the country as the government prepared to develop its own digital currency.
The legislation, which was titled “Cryptocurrency and Regulation of Official Digital Currency Bill, 2021”, could result in the banning of cryptocurrencies while allowing “for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
The increasing media coverage around the topic of crypto regulation, which was especially prominent during the second half of May when it cited the 2018 circular, has resulted in increased pressure for the clarification of crypto’s legal status as millions of Indian investors campaign for the repeal of legislation against crypto.
The clarification published by the RBI is widely considered a result of citizen pressure, as some experts believe there were concerns regarding possible lawsuits.
Financial entities in the country have also been using the past circular as a pretext for their position against crypto, which means the reversal could result in the pressure moving from the RBI to them.
With Indian citizens and companies starting to campaign in favor of crypto while the RIB is looking to implement a Central Bank Digital Currency that operates using the technology behind crypto, the need for a clear regulatory framework in the country is clearer than ever.
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