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RBI’s Clarification on Cryptocurrencies

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June 02, 2021

Why in news?

  • Some leading banks cautioned people against dealing in cryptocurrencies.
  • Following this, the RBI intervened and made a  clarification.

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  • So, the RBI now intervened and said the 2018 order was no longer valid from the date of the Supreme Court judgement (click here to know more).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

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