Saturday, May 21, 2022

RBI Clarifies Its Stance On Cryptocurrency, HDFC Retracts Its Earlier Advisory

HDFC Bank, the largest private sector bank of India, has retracted its earlier advisory on cryptocurrency after the Reserve Bank of India (RBI) clarified its stance on it.

The bank has recently asked its customers to ignore the mail HDFC had sent earlier as a warning for cryptocurrency transactions. The bank withdrew its decision in view of clarification from the RBI, where the central bank of India confirmed that post-Supreme Court order the RBI’s 2018 notification became invalid.

As per the report, on May 28, HDFC Bank had sent emails to some of its customers cautioning them for dealing in cryptocurrency. While doing so, the bank cited RBI’s 2018 decision in which it imposed a blanket ban on cryptocurrency in India. However, on May 31, RBI clarified its stance by saying that neither banks nor any other entities in the country could refer to its circular imposed in 2018 because, in 2020, it was quashed by the Supreme Court of India.

However, it is to be noted that the banks would still be carrying out the necessary customer due diligence process like Know Your Customer (KYC), Anti-Money Laundering (AML), COmbating of Financing of Terrorism (CFT) and obligation of regulated entities under Prevention of Money Laundering Act 2002. 

The Central Bank of India has also asked the banks to ensure compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for processing the overseas payment.  

The clarification released by the RBI is popularly known as Customer Due Diligence for transactions in cryptocurrency. It was published shortly after the major Indian banks started cautioning their customers against the services related to virtual currencies.

“In the light of the advisory issued by the RBI, we request you to ignore our earlier communication dated May 28, 2021,” asserted HDFC Bank in its latest mail to customers.

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