The cryptocurrency ecosystem in India has always been a contentious one. The lack of clarity has failed to address important aspects of the users in the region. In a brief respite, however, the country’s central bank and regulatory body Reserve Bank of India [RBI] clarified on Monday that its 2018 order directing financial institutions to halt dealing in digital currencies was revoked by the Supreme Court in March 2020.
Hence, the circular in question cannot be quoted by banks to refuse services to users dealing in cryptocurrencies. The clarification came in the wake of reports that certain banks such as HDFC Bank Ltd and State Bank of India [SBI] had warned customers via emails against engaging in virtual currencies such as Bitcoin.
Shrimohan Yadav, who happens to be the Chief General Manager of RBI stated,
“It has come to our attention through media reports that certain banks/ regulated entities have cautioned their customers against dealing in virtual currencies by making a reference to the RBI circular dated April 06, 2018. Such references to the above circular by banks/ regulated entities are not in order as this circular was set aside by the Hon’ble Supreme Court on March 04, 2020.”
Our RBI has finally sent out this notice to banks after 15 months since the Supreme Court verdict. Never late than never and we have this as a reason to celebrate! #IndiaWantsBitcoin
A brief history into India’s relationship with crypto
It all started late 2017 after two PILs were filed in the Supreme Court of India, one that sought to ban outrightly purchasing and selling cryptocurrencies in the country, while the other urged for proper regulation. Soon after which the government had set up a committee to investigate the industry and recommend actions.
A few months later, in April 2018, RBI issued a circular restricting commercial and co-operative banks, payments banks, small finance banks, NBFCs, and payment system providers from engaging in cryptocurrencies as well offering services to all platforms which deal with them. This crippled the crypto ecosystem overnight as many trading volumes across exchanges in the country fell sharply and many lost their jobs.
In May 2018, several Indian crypto exchanges and platforms filed a writ petition in the apex court of the country.
The following year, the government-established committee presented its report, prescribing a ban on “private cryptocurrencies” in India. Despite this, the Supreme Court revoked the RBI’s circular terming it as unconstitutional.
However, in January 2021, it seems like the cryptocurrency industry in India is back to square one as the government planned to introduce a bill to not just create a digitized version of the national currency but also to ban digital currency dealings.