Cryptocurrency is not banned in India. However, since 2018, cryptos were basically banned by the RBI.
Federal legislation has yet to materialize and there are not any adequate regulations in place. The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) are dominant regulatory bodies but they don’t have laws to enforce on the subject.
The Previous “Ban”
The RBI issued a crypto directive on April 6, 2018. This directive states that RBI will not serve any person or business involved with cryptocurrencies. The RBI was, and is still, working on its own centralized cryptocurrency offering.
Today, RBI, much to crypto investors’ relief, tweeted a link to the document below.
Their 2018 directive was overturned on March 4, 2020, by the Hon’ble Supreme Court. Seeing as it has been overturned, banks and other regulated financial institutions are not to cite or mention this directive in any way. Because of the lack of policies, in 2019, the Supreme Court requested the government to propose bills regarding crypto. There, however, haven’t been any developments.
Therefore, some banks were still readily referring to the outdated and unconstitutional circular from 2018. This certainly did not help with the crypto situation in India and contributed to pre-existing confusion about legality having to do with cryptocurrencies amid false media reports and criticism from the Finance Ministry.
Botched Bank Notices
Large banks such as HDFC and the State Bank of India were sending their customers official notices- a few citing the RBI circular- warning against transacting with cryptocurrencies. Customers received emails informing them that they’re not supposed to be using their bank accounts and credit cards for cryptocurrency-related transactions.
@HDFC_Bank I received an email threatening withdrawal of banking services because I purchased some crypto. Email cites 2018 RBI guidelines which were quashed by Supreme Court last year. Given crypto being deliberated by law makers, is this not harassment? pic.twitter.com/E3CAPx7hL4
— Sanat Mehrotra (@sanatmehrotra) May 28, 2021
HDFC Bank and SBI Credit Card issue advisory on not using their banking facilities for Cryptos (Bitcoins)
Say may suspend/restrict your bank account/credit card if you continue using it pic.twitter.com/PVGtOYG7vt
— Nagpal Manoj (@NagpalManoj) May 31, 2021
— Rinku Saini (@RegaFlick) May 28, 2021
Banks’ consequent refusal to work with anyone dealing in cryptocurrencies resulted in backlash and pleas to the RBI. For crypto backers in the country, the situation was dire, indeed.
Top Banks refusing to work with Crypto startups in India
We, the people of crypto, request @RBI to intervene & help this industry
Crypto assets are cutting edge innovation that India should participate
As a software nation, we need to innovate 🇮🇳#IndiaWantsCrypto
— Nischal (WazirX) ⚡️ (@NischalShetty) May 23, 2021
That being said, any customer due diligence processes aren’t to be forsaken.
RBI states, “Banks, as well as other entities addressed above, may, however, continue to carry out customer due 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.”
Will cryptocurrency ever be integrated in India for the many forward-thinking individuals who so desperately want it?