HomeLegal & RegulationHDFC retracts from crypto warning after RBI clarification

HDFC retracts from crypto warning after RBI clarification

HDFC Bank, the largest private lender in India, has informed its customers to ignore its recent communication against transacting or dealing with virtual currencies. This comes after the central bank clarified its regulatory stance on virtual currencies on Monday (31 May).’

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HDFC, relying on an RBI circular dated April 6, 2018, had recently warned its customers from dealing in virtual currencies and asked the customers to visit the nearest branch to clarify the nature of certain transactions. The April 2018 circular prohibited banks and regulated entities from dealing in virtual currencies or providing services for facilitating any person or entity in dealing with or settling virtual currencies. The said circular was struck down by the Supreme Court in March 2020 on the grounds of proportionality.

Ignoring the Supreme Court judgment, many banks and RBI regulated entities were still acting in accordance with the circular. The 31 May 2021 circular by RBI had clarified that the April 6 circular is no longer valid and therefore cannot be cited or quoted from. RBI, however, asked banks and regulated entities to continue carrying out due diligence on customers prescribed under existing regulations (PMLA, FEMA, AML, etc).

There were reports of an informal ban by RBI in early May with many regulated entities severing ties with the crypto exchanges. The crypto exchanges were contemplating approaching Apex Court before the 31 May clarification was issued.

This week, the industry body the Blockchain and Crypto Assets Council (BACC), a part of the Internet and Mobile Association of India announced the setting up of a self-regulating body to oversee crypto exchanges in India.

Kumar manages the tech backend at Crypto Vakil. He intends to work at the intersection of law and technology.

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