Today, the Reserve Bank of India (RBI) released a press release to clarify the ban on crypto transactions in the country. Part of the statement stated that it is not against the law for bank users to trade in digital currencies. The RBI further reiterated that it only mandated banks to conduct due diligence on their users that trade cryptocurrencies.
“Banks and other financial institutions must keep conducting due diligence on their customers and comply with the regulations under the prevention of money laundering act (PMLA), 2002 and applicable provisions under the foreign exchange management act (FEMA) for international remittances. In addition, banks must combine the above with other regulatory compliance standards for combating the financing of terrorism (CFT), anti-money laundering (AML), and know your customer (KYC).”
Back in 2017, the RBI cautioned crypto holders and forbade financial institutions from conducting crypto transactions. As a result, many crypto users lost their accounts with various banks, and most exchanges, notably ZebPay, had to shut down their operations. But crypto enthusiasts took the matter to the supreme court, which reversed the RBI’s decision, labeling it ‘unconstitutional.’ part of the supreme court’s judgment stated that there was no “proportionality” in the reserve bank’s decision against crypto transactions. But as at that time, many private banks still failed to heed the supreme court’s ruling.
Most Indian Banks Have Banned Crypto Transactions
In recent weeks, SBI card, HDFC bank, and other popular banks have given their customers an official warning not to conduct transactions involving digital assets, as indicated in the RBI’s press release from 2018. But the reserve bank has confirmed that their 2018 press release is no longer valid. It stated that “based on an order from the honorable supreme court, the press release ceases to hold ground since the day the supreme court made the announcement. Hence, it can no longer be quoted or used as a regulation.” as widely reported in the media, the supreme court in India, as of March 2020, has annulled the crypto ban that prevented banks from conducting crypto-related transactions. Per the economic times, the Indian government is already considering re-addressing their ban on crypto mining operations and crypto-related transactions in the country by modifying the country’s existing crypto regulations.
This new clarification is of great cheer to India’s crypto userbase, which can now trade their crypto without fear of contravening the law. Indian authorities’ surprise change of heart might not be unconnected with a donation of $1 billion to India’s covid-19 crypto relief fund by Vitalik Butarin, co-founder of Ethereum. The blockchain billionaire made his $1 billion donations using the Shiba Inu cryptocurrency. Butarin’s donation is the largest single financial aid that India has received since the COVID-19 pandemic.
RBI update regarding crypto. Source: Twitter
A User Boom
There will likely be a massive rise in crypto users now since the authorities have made it clear that crypto trading in the country is not illegal. Crypto analysts have estimated that this news will boost the Indian economy with at least $13 billion in revenue.