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Positive News For Crypto From RBI

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After much turmoil around the acceptance of cryptocurrencies, the RBI has declared that banks or regulated entities can no longer cite its 2018 circular that prohibited them from dealing with cryptocurrencies. This statement comes after several media reports blowing the trumpet about banks and financial entities preventing customers from dealing with crypto currencies.

It was not long ago that the Paytm Payments Bank stated that it no longer accepts cryptocurrency, followed by WazirX’s tweets of the same. The buck was not only passed about by Paytm but by every bank across the country. Investors were urged to understand the nature of these transactions and to be mindful of the hazards connected with crypto and virtual currencies. Failure to comply, according to the emails sent out by these institutions, could result in the permanent closure of bank accounts and the suspension of credit cards.

Yet now the RBI has clarified that the order stating the circular has been set aside by the Supreme Court (SC) in March 2020, it deems the circular as invalid from the date of the SC order and banks and other similar entities are prohibited from citing the circular.

One of India's leading cryptocurrency exchanges, WazirX, applauded the move. It was praised as a promising indication by Nischal Shetty, CEO of Wazir X, who said, "This declaration offers a ray of light for the Indian crypto sector." The Reserve Bank of India's clarification on this is greatly appreciated. “We expect that this circular would inspire banks to improve their compliance departments and give Indian crypto exchanges banking access”.

Given the hazy and ambiguous nature of cryptocurrency regulation in India, most banks have begun to distance themselves from cryptocurrency exchanges such as Coin DCX, WazirX, and others. Paytm recently cut ties with WazirX, making it impossible for many crypto investors to deposit or withdraw funds from their accounts with the payment titan.

“This is a fantastic move because it gives banks clarity on whether or not they should participate with the crypto industry. Since there's a chance that banks may work more closely with crypto-exchanges in the future, we can expect easier trading and more payment and deposit choices in the near future,” she said

Banks and other entities can, however, "continue to carry out customer due diligence processes in accordance with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating Terrorist Financing (CFT), and obligations of regulated entities under the Prevention of Money Laundering Act (PMLA), 2002, in addition to ensuring compliance with the PMLA," according to the RBI statement.

Yumna Ahmad, a communications professional located in Delhi who invests in cryptocurrencies on a regular basis, has noticed an improvement in transactional ease. “This is a fantastic move because it gives banks clarity on whether or not they should participate with the crypto industry. Since there's a chance that banks may work more closely with crypto-exchanges in the future, we can expect easier trading and more payment and deposit choices in the near future,” she said.

Rameesh Kailasam of Indiatech, echoing similar sentiments, said the RBI clarification is timely and encouraging since it explicitly proves that the prior circular is no longer relevant following the SC ruling and that banks cannot use this as a justification for denial.

Experts believe there is now a chance for substantial industry-government collaboration on crypto-related policies.

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