RBI says 2018 indian crypto ban release can’t be quoted
India is one of the countries that actively tries to regulate various digital assets, and the Indian crypto ban has depicted this.
In 2018 a ban was placed on the trading of cryptocurrencies, with one of the reasons for the action being the ban to create India's cryptocurrency.
Although the initial statement caused a bit of fuss in crypto (due to many traders in the country), new information sufficed to indicate that this 2018 release might not be valid. Therefore, creating a glimmer of hope for crypto traders and investors located in India.
Indian crypto ban
The legal status of cryptocurrencies in India has been debated for a while as several entities consider them legal and others consider them illegal. However, news broke the crypto space in 2018 when a statement was released by the reserve bank of India (RBI) stating an imposed restriction on financial bodies and institutions under its control, and this ban restricts the provision of services relating to cryptocurrencies in India, the supreme court of India however overruled this release.
However, individuals and banks wrongfully understood this statement as a ban placed on cryptocurrencies by the Indian government.
Before this release by the reserve bank of India, there were several occasions where the trading of cryptocurrencies was warned against by the RBI, and they include;
- A 2017 release by the Reserve bank of India cautioning individuals and banks under its regulation about the risks they will be exposed to if they decide to actively partake in the activities of the crypto space. Therefore, stated that any entity or individual participating does so at its own risk.
- In the latter half of 2017, the Reserve Bank of India issued another statement of clarification stating that it had not provided the permission or licenses to individuals or companies to participate or start businesses that are related to cryptocurrencies, nor did it grant permissions for the organizing or participation in initial coin offerings. This timeline of events was succeeded by the 2018 release continuing the uncertainty about cryptocurrencies' legal and trading status in India.
Banks can't quote the 2018 circular
A new publication concerning "customer due diligence for transactions in virtual currencies" released by the Reserve Bank of India on Monday, 31/05/2021, further clarifies the debate about the legality and ban on cryptocurrencies in India.
The RBI stated in response to reports about major lending banks such as the state bank of India and HDFC reaching out to select clients concerning transactions involving digital currencies, also cautioning against such activities, issuing threats of the cancellation of their card. These banks justified issuing these reports by citing the 2018 circular released by the Reserve Bank of India.
However, as earlier mentioned, this ruling was overturned by the supreme court after several aspects were found to be disproportionate by the court. Some other discoveries made by the court include;
- Consistent statement of the central bank denying the prohibition of virtual currencies in India and the RBI not taking into account other alternatives before releasing the circular.
- The release of the circular by the RBI while failing to state an instance of the negative impact of virtual currencies on banks and financial institutions under their control.
- Failure of the RBI to fulfill its wish to create India's digital rupee.
The above few reasons, amongst others, prompted the supreme court to render the issued document invalid.
Therefore, the latest release by the RBI allows crypto services to be rendered by banks under their control, provided there is compliance with KYC, AML, CFT, PMLA, and FEMA regulations.
To read more about the supreme court ruling, click here.
What does this clarification mean?
The ruling of the supreme court and clarification issued by the reserves bank of India create a more conducive market space for crypto traders and investors alike. By this clarification, investors will be allowed to utilize services provided by financial institutions to carry out transactions involving crypto trading in India.
However, the main question about the legality of cryptocurrencies in India is still a source of debate. Hopefully, this clarification will push in favor of the adoption of cryptocurrencies in India.
