Citing a notification which was issued on 6th April 2018, banks were blocking out crypto transactions to happen, because of the RBI’s notice. Now RBI clarifies that this notification has been set aside by the Supreme Court, and can no longer be cited by the banks for blocking crypto transactions.
Leading banks like HDFC, ICICI Bank, State Bank of India and many others continued to block crypto transactions citing RBI’s long-standing stance on cryptocurrency. Since in the last month, cryptocurrency transactions increased exponentially, these banks had to send emails to their customers to stop paying using cryptocurrencies, threatening that they will have to block their accounts.
Shivam Thakral, CEO of BuyUcoin said, “We thank the Reserve Bank of India for issuing clarity on the matter. The Crypto industry has been facing a lot of issues when it comes to using formal banking channels for crypto transactions. RBI’s stance on crypto transactions has not changed since the Supreme Court order in March 2020 and it was sad to see banks not helping out with crypto exchanges which impacted millions of users and investors across the country. Now that the times have changed, this is will help us progress forward.”
RBI had issued a circular in 2018, asking banks and other RBI-regulated entities to not extend any banking services to crypto startups. But after 23 months of hearing at various high courts and later at the Supreme Court, the notification was set aside by the SC on the grounds of proportionality.
Most of the banks like ICICI Bank, Paytm Payments Bank and the SBI did not directly cite the notification, HDFC Bank cited the RBI April 6, 2018 notification to justify their anti-crypto stance, in a slew of emails to its users.
“It has been informed to us, that certain banks are asking their customers to not deal in virtual currencies by referring the RBI circular DBR.No.BP.BC.104/08.13.102/2017-18 dated April 06, 2018. Such references circular are not in order as this was set aside by the Hon’ble Supreme Court on March 04, 2020. So the circular is no longer valid, in view of the order of the Hon’ble Supreme Court, and therefore cannot be cited or quoted from.” RBI said.
It was widely reported that RBI had informally asked banks to hold back crypto transactions. The bank formally did not issue any public notice regarding this. Though an RBI officer said that RBI is free to take these steps to curb the massive conversions of INR into crypto.