India backs down from its inital ban on cryptocurrencies.
The Reserve Bank of India has taken steps to ease transactions in virtual currency.
The central bank recently requested that Indian banks, non-bank financial companies, and payment system providers stop citing a 2018 regulatory circular, which prohibits them from dealing and transacting in virtual currency.
The statement, issued at the end of May, came as a response to media reports of HDFC Bank and the State Bank of India cautioning their clients against dealing in virtual currency while citing the 2018 circular. The banks reportedly warned clients that if they continued in such transactions that the banks could cancel or suspend their bank cards.
The circular in question mandated that no RBI-regulated entity would be permitted to engage in “maintaining accounts, registering, trading, settling, clearing, giving loans against virtual token, accepting them as collateral, opening accounts of exchange dealing with them and transfer/receipt of money in accounts relating to purchase/sale of VCs.”
Approximately two years after RBI enacted its virtual currency ban, however, the Supreme Court of India set the prohibition aside in its March 4, 2020 decision in Internet and Mobile Association of India vs. RBI.
The central bank also took the opportunity in its statement to remind its regulated entities that virtual currency transactions were not free from regulations and reminded them that they could “continue to carry out customer due diligence processes in line with regulations governing standards for know your customer (KYC), anti-money laundering, combating of financial terrorism, and obligations of regulated entities under Prevention of Money Laundering Act 2002 in addition to ensuring compliance with relevant provisions under Foreign Exchange Management Act for overseas remittances.”
