RBI on Monday requested banks, NBFCs, and cost system suppliers not to refer to its earlier digital currencies-related round, that was issued in April 2018 and later apart by the Supreme Court, of their communications to prospects.
The newest directive comes towards the backdrop of some banks and controlled entities citing the round and cautioning prospects towards dealing in digital currencies.
The round pertaining to digital currencies was issued by the Reserve Bank of India (RBI) on April 6, 2018 and the identical was put aside by the Supreme Court on March 4, 2020. As per the 2018 round, entities regulated by RBI had been prohibited from “providing any service in relation to virtual currencies including those of transfer or receipt of money in accounts relating to the purchase or sale of virtual currencies”.
In a round with the header ”Customer Due Diligence for transactions in Virtual Currencies (VC)”, RBI on Monday stated that it has come to its consideration by way of media stories that sure banks/ regulated entities have cautioned their prospects towards dealing in digital currencies by making a reference to the round that was issued on April 6, 2018.
“Such references to the.. 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Hon’ble Supreme Court on March 04, 2020… As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from,” the apex financial institution stated.
The round, issued on Monday, is addressed to all industrial and co-operative banks, funds banks, small finance banks, NBFCs, and cost system suppliers.
According to RBI, banks in addition to different entities, could, nevertheless, proceed to perform buyer due diligence processes according to laws governing requirements for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT), and obligations of regulated entities below PMLA as well as to guaranteeing compliance with related provisions below FEMA for abroad remittances.
PMLA refers to Prevention of Money Laundering Act, 2002 and FEMA is Foreign Exchange Management Act.
Private digital currencies/ digital currencies/ crypto currencies have gained reputation lately. In India, the regulators and governments have been sceptical about these currencies and are apprehensive in regards to the related dangers, RBI had stated in its Booklet on Payment Systems issued in January 2021.
Nevertheless, RBI was exploring the likelihood as to “whether there is a need for a digital version of fiat currency and in case there is, then how to operationalise it, as per the booklet.
The government is also in the process of bringing a bill on crypto currencies as existing laws are inadequate to deal with issues concerning them.
