After a months-long tug of war between financial institutions and cryptocurrency traders in India, finally, the later ones have got the last laugh.
RBI’s has instructed all financial institutions to refrain from issuing any warning that could discourage crypto enthusiasts. The supreme financial body of India has also instructed banks not to block and funds or transactions related to crypto trading or mining unless the transactions deemed suspicious.
The instructions are issued after several reports on financial institutions coming down heavily on crypto exchanges citing the 2018 circular from RBI.
In 2018, RBI prohibited all financial institutions in India from processing any transactions related to cryptocurrencies. Quite recently the few banks withheld the payments of many crypto exchanges in India which citing that circular.
The circular was later challenged in the Supreme Court.
On April 04, 2020, the Supreme court of India quashed the RBI circular. However, there were few banks that were not having any clarity from RBI and they continued blocking transactions related to crypto wallets.
Today, RBI has cleared a way for all crypto-related transactions by stating that the circular issued in 2018 is no longer valid and no banks could take any actions based on instructions quoted in that.
It means that all cryptocurrency transactions are legal in India, and banks have no authority to block any crypto-related transactions unless it deemed illegal or suspicious.
RBI’ latest statement comes with few instructions as well. RBI has asked banks to continue the strict screening of each and every crypto related transactions to meet all 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.
It means that the crypto traders in India can have little joy after the the latest directive from RBI. As banks will continue their cautious approach towards cryptocurrencies, it would lead to other complications and situation that may not be creating favouring conditions for traders as well crypto exchanges.
But crypto exchanger are seeing RBI’s clarification as a ray of hope.
“One of the biggest hindrances was that they did not know what the RBI’s outlook would be. The latest notification clarifies that. The second was what sort of due diligence do crypto exchanges in India follow? What sort of compliance checks do exchanges comply with and work towards? We have been closely working with the different departments in various banks to show them how we do KYC/AML compliances and we will have to continue working towards that as an industry because this is an unregulated industry and it just becomes more important that we follow all the existing guidelines for the finance sector even if there are no regulations for the sector. It is important for us to follow these and as exchanges we are already doing that.” says Nichal Shetty, CEO – WazirX, while talking to another media outlet.Source: ET
Alls aid and done, it’s a little too early to celebrate for crypto enthusiasts. None of the cryptocurrencies currently being traded is backed by the RBI. Given the decentralised nature of these digital currencies, it is nearly impossible to do an investigation of transactions that are found to be carried out in relation to some illegal activities. None of the crypto exchanges is also ready to take any responsibility as well, be it related to checking the background of traders. In all such scenario, RBI doesn’t seem very confident about these cryptocurrencies.
Few other reports are claiming that the work to launch the government’s backed cryptocurrency is already in progress.
“As the underlying technology is still developing, we are exploring ways for a clear, safe and legally certain settlement finality, which is most crucial for a secure and efficient payment system,” RBI governor Shaktikanta Das had said in March.
Undoubtedly, the latest RBI directive is a big boost to all crypto enthusiasts as this could one stop closer to have a clear runway for cryptocurrencies in India. at the same time, with so many ‘if’ and ‘buts’ the dust over cryptocurrency is far from over anytime soon. Until then, serious investors and professional traders are likely to stay away from cryptocurrencies.