RBI Withdraws April 2018 Circular, Ending Bank Cracksdown on Cryptocurrency Transactions

The Reserve Bank of India (RBI) has withdrawn its April 2018 circular, which banned banks from facilitating cryptocurrency transactions. The move, hailed by the nascent industry, brings an end to banks' crackdown on cryptocurrency dealings. Several lenders, including HDFC Bank and State Bank of India, had been warning customers about the risks of trading in cryptocurrency, citing the RBI circular.

In response to media reports that banks were cautioning customers about dealing in virtual currencies, the RBI clarified that references to the April 2018 circular are no longer valid. The circular was set aside by the Supreme Court on March 4, 2020. Crypto industry executives welcome the statement, calling it a "significant development" that offers much-needed clarity to the industry.

Key Takeaways:

• The RBI has withdrawn its April 2018 circular, which banned banks from facilitating cryptocurrency transactions.
• The circular was set aside by the Supreme Court on March 4, 2020, and is no longer valid from that date.
• Several lenders, including HDFC Bank and State Bank of India, had been warning customers about the risks of trading in cryptocurrency, citing the RBI circular.
• Indian crypto exchanges had witnessed massive traction, with investors drawn by Bitcoin's bull rally in 2020 and early 2021.
• Banks had pulled the plug on business accounts of crypto exchanges, blocked exchanges' ability to accept rupee deposits, and instructed payment gateways to not work with exchanges.
• RBI has asked banks to continue carrying out due diligence process prescribed under existing regulations, including KYC, AML, and CFT.
• The move is seen as a big win for the crypto industry, which had been struggling to get a bank account due to lack of clarity from the RBI.

Statistics:

• The Supreme Court set aside the RBI's April 2018 circular on March 4, 2020, rendering it invalid from that date.
• Several banks, including ICICI Bank, Yes Bank, and IndusInd Bank, have pulled the plug on business accounts of crypto exchanges.
• Indian crypto exchanges witnessed massive traction, with investors drawn by Bitcoin's bull rally in 2020 and early 2021.
• RBI has asked banks to continue carrying out due diligence process prescribed under existing regulations, affecting 2.8 million users of cryptocurrency trading exchanges in India.

Sources:

• "RBI Withdraws April 2018 Circular, Ending Bank Cracksdown on Cryptocurrency Transactions" by ET reported on June 13, 2022.
• Statement by Reserve Bank of India dated June 13, 2022.
• "Leading banks clamp down on cryptocurrency transactions" by ET reported on May 30, 2022.
• "India's cryptocurrency exchanges witness massive traction" by ET reported on April 15, 2021.