For months since the landmark judgment, banks have been citing the 2018 Banking Ban by RBI to shut down bank accounts used for cryptocurrency trading. RBI’s annual report now clearly mentions how the Supreme Court set aside their circular.
In 2018, RBI released a circular “Prohibition on dealing in Virtual Currencies (VCs)”, with guidelines for regulated entities like banks and NBFCs to not deal in Cryptocurrencies or support businesses and individuals who do.
The circular was challenged in Supreme court by IAMAI, Crypto exchanges and several individuals. The top Court on March 04, 2020 ruled the circular to be unconstitutional on the grounds of proportionality.
However, the RBI never released an official revision to the original circular and it still stands on the website. An RTI query to the Reserve Bank also revealed that RBI is not prohibiting any banks from dealing with businesses and individuals dealing in cryptocurrencies.
Despite this, many banks like Axis Bank and PayTM began closing accounts of users they found to have been trading cryptocurrencies. While the end decision does remain with the bank, the problem truly came to light as bank managers began citing RBI’s 2018 circular as grounds to act when the circular itself is not valid anymore.
No amount of proofs would budge the stubborn bank staff who forced closed several accounts and made many users sign declarations to never deal in crypto.
However, it may change soon as RBI’s annual report published recently now has a mention of the Supreme Court judgment.
Reserve Bank Acknowledges Supreme Court Judgment on Banking Ban
In chapter X titled “Communication, International Relations, Research and Statistics”, of the recently published Annual Report, RBI says
“The Supreme Court vide its decision dated March 4, 2020 in the case of Internet and Mobile Association of India v. Reserve Bank of India has, on the ground of proportionality, set aside the Reserve Bank’s direction in dealing with virtual currencies, where entities regulated by the Reserve Bank were directed not to deal in virtual currencies or provide services for facilitating any person or entity in dealing with or settling virtual currencies and to exit the relationship with such persons or entities, if they were already providing such services to them.”X.81, RBI Annual Report 2020
So what does this mean for Crypto traders?
It means that now traders have an RBI official document to share with banks and managers proving that the circular cited by them holds no value anymore.
Whether this will work with them or not, we can’t say for sure. But it is a step one can take.