RBI monetary policy: RBI’s concerns on cryptocurrency remain unchanged, Governor Shaktikanta Das says

Mumbai: Reserve Bank of India (RBI) Governor Shaktikanta Das said on Friday that the central bank’s position on the
trading of cryptocurrency in India remains unchanged, and that it has “major concerns” about its impact on the country’s financial stability.

“There is no change in RBI’s position (on cryptocurrencies)… We have major concerns around cryptocurrency, which have been conveyed to the government as well,” Das said during the Monetary Policy Committee (MPC) press conference. This is a reiteration of the central bank’s long-standing stance against the use of virtual currencies in India.

Asked how crypto investors in India should view the purchase of these assets, he said, “The central bank doesn’t give any investment advice. It is on each investor to make their own appraisal and take a careful and prudent call on their own investments.”

Das’ statement comes just days after the central bank told Indian banks
to stop referring to its April 2018 circular—which had banned all regulated banks from facilitating cryptocurrency trades—to warn customers against trading in the assets. This circular had been struck down by the Supreme Court in February 2020, in response to a petition filed by the Internet and Mobile Association of India (IAMAI) and crypto exchanges.

“Our circular clarifies our position very clearly that the Supreme Court set aside our 2018 circular. It came to our surprise that banks were citing the old circular in correspondence with customers,” said Das. “We wanted to set the record straight—that the circular has been made invalid.”

reported on May 31 that leading Indian financial institutions were clamping down on customers using bank accounts for cryptocurrency transactions. Over the past few months, lenders such as HDFC Bank and SBI Card sent notices to many customers who bought cryptocurrencies, warning them of curbs, including the permanent closure of accounts.

Das had made a similar statement during a television interview in February, in which he expressed the central bank’s concerns about the unrestricted use of virtual currencies and its impact on India’s financial stability. Then too he had said that the government was aware of the RBI’s position on cryptocurrencies.

In its latest circular, issued on May 31, the central bank also asked regulated financial institutions to continue carrying out due diligence as prescribed under existing regulations. These include checks around know your customer (KYC), anti-money laundering, and combating of financing of terrorism rules, as well as compliance with Foreign Exchange Management Act (FEMA) guidelines for overseas remittances.

India’s draft Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, was expected to be tabled in the budget session of Parliament, which concluded in April. The proposed legislation is based on the recommendations of a parliamentary committee headed by former finance secretary Subash Garg.

ET had previously reported that the draft bill could be referred to a standing committee before being tabled in Parliament. The bill, in its current form, is expected to criminalise not just trading but holding cryptocurrency assets as well, much to the dismay of India’s nascent crypto industry.

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