consultantsreview logo

Consultants Review Magazine

Banks can't cite 2018 RBI circular to caution clients on the virtual currencies

The Reserve Bank of India (RBI) on Monday said that the banks and other regulated entities cannot cite its April 2018 order on its virtual currencies (VCs) as it was set aside by the Supreme Court last year.

“In view of the order of the Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from,” the RBI said in a notification. The clarification came after State Bank of India and HDFC Bank cautioned their customers against dealing in VCs such as bitcoin citing the April 2018 order of the RBI. Banks also warned customers that failure to adhere to the advisory may lead to cancellation or suspension of their cards.

The clarification could give relief to customers who have invested in cryptos.”It has come to our attention through media reports that certain banks and regulated entities have cautioned their customers against dealing in virtual currencies by making a reference to the RBI circular dated April 8, 2018,” the central bank said.

Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase or sale of VCs

“Such references to the RBI circular by banks and regulated entities are not in order as this circular was set aside by the Supreme Court on March 4, 2020 in the matter of writ petition (Civil) No.528 of 2018 (Internet and Mobile Association of India vs Reserve Bank of India),” it added.

“Such references to the RBI circular by banks and regulated entities are not in order as this circular was set aside by the Supreme Court on March 4, 2020 in the matter of writ petition (Civil) No.528 of 2018 (Internet and Mobile Association of India vs Reserve Bank of India),” it added.

In its April 2018 circular, the RBI had said, “In view of the associated risks, it has been decided that, with immediate effect, entities regulated by the Reserve Bank shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs.”

“Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase or sale of VCs,” it had said.

Magazine Current Issue