In surprising but positive News on crypto, the Reserve Bank of India (RBI) clarified on May 31 that banks and other regulated entities cannot cite its 2018 circular regarding cryptocurrencies as it was voided by the Supreme Court (SC) in March 2020. The circular is not valid from the date of the SC order and cannot be cited or quoted from, the RBI said.
This clarification arises in light of recent communications with investors from various banking entities such as HDFC, the SBI, which cited 2018 circular and aims to alert them to the "uncertain regulatory landscape" of this space. Investors were asked to clarify the nature of these transactions and to be aware of the risks associated with cryptocurrencies and virtual currencies. The mail sent by these banks in this regard also indicated that not doing so could mean the permanent closure of bank accounts and the suspension of credit cards.
What does this circular mean for investors?
WazirX, one of the largest crypto exchanges in India, welcomed the move, according to our news sources. Nischal Shetty, CEO of Wazir X, praised it as a positive sign, saying: "This document is a ray of hope for the Indian crypto ecosystem. We really appreciate the clarification from RBI on this matter. We hope this circular encourages banks to upgrade their compliance teams. And by providing bank access to Indian crypto exchanges. "
Given how vague and gray crypto regulations remain in India, most banks have started to part ways with crypto exchanges like Coin DCX, WazirX, and more. Recently, Paytm also cut ties with WazirX, leaving many crypto investors unable to deposit or withdraw money from their accounts linked to the payments giant.
Investor anger was evident as many complained about long delays and not being able to deposit funds on time, leading them to miss market dips, which are generally considered a good time to buy. Karan Anand, an avid cryptocurrency investor, mentioned how important it is for cryptocurrency exchanges to facilitate their deposit process. "You can't wait for people to be able to buy crypto for days, especially when most exchanges claim to be able to do so in a few minutes," he said.
Given the importance of RBI guidance to banks, an RBI explanation is a respite for most cryptocurrency exchanges. News Reports says, "The failure of the apex bank to demonstrate how regulated financial institutions will suffer due to cryptocurrency operations has long been questioned, making it difficult for the smooth growth of crypto services in India".
Yumna Ahmed, a Delhi-based communications professional who regularly invests in cryptocurrencies, finally sees some ease in transactions. "This is a great move as it shows banks whether or not they should engage with the crypto industry. Given that there are now opportunities to increase banks' cooperation with crypto exchanges, we can expect ease of trading and more payment and deposit options in the near future, ”she said.
Echoing similar views, Indiatech's Ramesh Kailasam said the clarification given by the RBI was timely and encouraging as it formally shows that the old circular is no longer valid after the Supreme Court ruling and that banks cannot use this. as a reason for rejection.
"IndiaTech.org is seeking regulatory clearance for this sector supported by the necessary checks and balances that would allow it to grow at a faster rate. IndiaTech.org has recommended similar checks and balances with respect to KYC, AML, CFT, FEMA, etc. .. "RBI now proposes that it is being implemented to ensure due diligence. We look forward to continued support from the government and regulator to gradually adopt this emerging technology, "added Kailasam.
Is all that clear?
However, a note of caution regarding banks exercising due diligence regarding cryptocurrency loops is clearly stated in the post. Banks should continue to comply with the relevant provisions of the Know Your Customer (Know Your Customer) and AML (Anti-Money Laundering), among others.
"We welcome the move by the Reserve Bank of India to clarify the position on the old circular which was ignored by the esteemed Supreme Court. I hope the confusion over it ends now. We also respect the concern that banks may have on AML Policies (Anti-money laundering) and discussions on the same The issue will strengthen the industry, investors, and investments will be safer. " Sumit Gupta, CEO, and co-founder of Coin DCX said.
However, due diligence is a legal process that all financial institutions must follow. All of these points in the news indicate the green shoots of the thriving cryptocurrency industry in India, which has suffered heavily from unclear government stands and vague regulations. Despite the hazy cryptocurrency landscape of the country, Indians have invested over a billion dollars in the cryptocurrency market, making India one of the best countries in terms of virtual currency trading.
Industry experts now see hope for significant industry-government engagement in cryptocurrency policies. "This is very positive for the ecosystem and he feels that the general consensus within government and regulatory bodies is against innovation and stifling growth in the crypto ecosystem in India," said Sandeep Naliwal, Co-founder and COO of Polygon. , an Indian platform for blockchain scalability.
Polygon recently reached meteoric popularity when Shark Tank's Mark Cuban invested fame in the company. Polygon's original native token, Matic has risen from just $ 26 million since its inception in 2019 to more than $ 14 billion recently.
"The Statement of the Reserve Bank of India to banks on cryptocurrency investments clarifies its position on whether clients are legally allowed to invest in cryptocurrencies, according to our news sources. Instead of refusing to serve their clients based on an invalid circular, it is time for banks to get involved in investing in cryptocurrencies Get on the bandwagon and enable currency exchanges via UPI transfers. Cryptocurrencies are the future and we must ensure we stay at the forefront of this technology, ”says Ashish Singhal, CEO of Coinswitch Kuber.
With the RBI green referring to cryptocurrency trading and more and more companies and individuals embracing cryptocurrency and core blockchain applications, formal regulation of the field is no longer a distant dream. As the country seeks greater inclusion and financial participation, it is imperative that there is an enabling environment to facilitate them.
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