The Reserve Bank of India (“RBI”) took note of various news reports which stated that certain banks/ regulated entities had cautioned their customers against dealing in virtual currencies by making a reference to the RBI circular DBR.No.BP.BC.104/08.13.102/2017-18 dated April 06, 2018 (“April Circular”).
To clarify its position, RBI issued a circular addressed to all commercial and co-operative banks, payments banks, small finance banks, non-banking financial companies and payment system providers dated May 31, 2021 (“Circular”), stating that references to the April Circular made by banks/ regulated entities were not in order and that the April Circular could not be cited or quoted from as it was set aside by the Hon’ble Supreme Court on March 04, 2020 in the matter of Writ Petition (Civil) No.528 of 2018 (Internet and Mobile Association of India v. Reserve Bank of India).
RBI however maintained that banks and other entities addressed in the Circular could continue to carry out customer due diligence processes in line with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT) and obligations of regulated entities under Prevention of Money Laundering Act, (PMLA), 2002 in addition to ensuring compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances.
This update has been contributed by Anurag Prasad (Associate).
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