RBI asks banks for customer due diligence for transactions in virtual currencies

RBI asked banks, as well as other entities to continue to carry out customer due diligence processes in line with regulations governing standards

The Reserve Bank of India (RBI) has advised banks and other regulated entities to continue to undertake due diligence of customers dealing with virtual currencies popularly known as crypto currencies.

This came in the form a clarification issued by the RBI the wake of media reports concerning Virtual Currencies (VC) wherein it said its earlier order on this subject is no longer valid as it had been set aside by the Supreme Court.

“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 6, 2018,” the RBI said in a circular on Monday.

“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 in the matter of Writ Petition (Civil) No.528 of 2018 (Internet and Mobile Association of India v. Reserve Bank of India),” it said.

“As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from,” the RBI circular said.

However, the RBI asked banks, as well as other entities to 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 oversea remittances.

Commenting on this Sumit Gupta, CEO and Co-Founder, CoinDCX said,”We welcome the move from the RBI to clarify the stand around the old circular which was set aside by the honorable Supreme Court. I hope the confusion around the same ends now.”

“We also respect the concern the banks may have around AML policies and discussions around the same will make the industry stronger, and investors and investments safer,” he said.

Avinash Shekhar, Co-CEO at ZebPay said, “This is positive news for the entire crypto industry — businesses, stakeholders, and investors. Investing in crypto has always been 100% legal in India and the new RBI circular clearly confirms the right to do business with crypto firms.”

“We have always enjoyed great relationships with our banking and payment gateway partners. Since we, have always operated with strict KYC and AML policies, this is a welcome move to strengthen this relationship and make crypto investments accessible to more Indian investors,” he added.

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