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'Circular is no longer valid': RBI after banks' warning to customers dealing in cryptos

Such references to the circular by banks or regulated entities are not in order as this circular was set aside by Supreme Court on March 04, 2020, says RBI

Many investors have complained about banks denying digital currency exchanges' services to them citing the RBI circular Many investors have complained about banks denying digital currency exchanges' services to them citing the RBI circular

In a huge relief to cryptocurrency investors, the RBI on Monday issued a clarification saying banks or entities can't cite its 2018 order that barred them from dealing with virtual cryptocurrencies. The RBI's statement comes in the wake of several media reports claiming some banks are warning customers against dealing in virtual currencies by referring to the RBI's April 6, 2018, order.

The RBI said the order is no longer valid now. "Such references to the above circular by banks or regulated entities are not in order as this circular was set aside by the Hon'ble Supreme Court on March 04, 2020," the apex bank said in a statement.

It said given the order of the SC, the RBI's 2018 circular is no longer valid from the date of its judgement on the matter, and therefore, can't be cited or quoted from.

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The issue was flagged via social media when investors said several private and public sector banks, including HDFC Bank, State Bank of India and others, warned and denied digital currency exchanges' services citing the RBI's old circular. These banks had also reportedly warned of the suspension of accounts dealing in cryptocurrencies.

"This is a very positive development for the whole industry. There was a lot of confusion among banks about whether they can service their clients in the industry. This notification makes it clear," said Nischal Shetty, Founder and Chief Executive Officer of WazirX, reported The Economic Times. He also shared the RBI's official circular on the matter.

India's largest crypto exchange, WazirX termed it a "positive news from the RBI."

The RBI statement said banks and other entities can, however, "continue to carry out customer due to diligence processes in line with regulations governing standards for 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, (PMLA), 2002, in addition to ensuring compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances".

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