RBI’s Clarification on Cryptocurrencies

Why in news?

What did the RBI say and what was the trigger?

State Bank of India and HDFC Bank cautioned their customers against dealing in virtual currencies such as Bitcoin.
They cited the April 2018 order of the RBI on virtual currencies (VCs).
Banks also warned customers that failure to adhere to the advisory may lead to cancellation or suspension of their cards.
The 2018 order banned entities regulated by RBI from dealing in VCs or providing services for facilitating others to deal with or settling VCs.
The RBI had no option but to allow it after the Supreme Court lifted the ban in 2020.
So, the RBI now intervened and said the 2018 order was no longer valid from the date of the Supreme Court judgement (click here to know more).
Therefore, it cannot be cited or quoted from.

What clarification does it offer?

The RBI clarification is expected to give some relief to customers who have invested in cryptocurrencies.
Many Indians have invested in cryptocurrencies like Bitcoin and Ethereum.
Their money, estimated to be around Rs 10,000 crore, will not be blocked now.
Banks, as well as other entities addressed above, may continue to carry out customer due diligence processes with existing mechanisms.
E.g. KYC, Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT), PMLA, FEMA, etc.
Meanwhile, the RBI is in the process of developing its own virtual currency.

Source: The Indian Express