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Understanding RBI's latest stand on cryptocurrency and what it means for investors

The Reserve Bank of India has no option but to allow cryptocurrencies after the Supreme Court lifted the banking ban last year on March 4, 2020.

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Understanding RBI's latest stand on cryptocurrency and what it means for investors
Cryptocurrency players urge the government against the ban and seek engagement to build consensus on crypto regulation (Image Source: IANS)
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The Reserve Bank of India (RBI) on Monday came out with an important clarification on cryptocurrencies saying that the banks cannot refer to its April 2018 circular to caution their customers against trading in cryptocurrencies.

The RBI clarification comes after the State Bank of India and HDFC Bank cautioned their customers against dealing in virtual currencies such as Bitcoin citing the April 2018 order of the RBI. Banks also warned customers that failure to adhere to the advisory may lead to cancellation or suspension of their cards.

The RBI has no option but to allow it after the Supreme Court lifted the banking ban last year on March 4, 2020. So, the RBI intervened and asked banks to stop being notorious. 

"In view of the order of the Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from," the RBI said in a notification to banks.

This comes at a crucial time as the government is in process of framing rules to either ban or regulate cryptocurrency trade in the country.

However, the clarification from the RBI, which is developing its own virtual currency, is expected to give some relief to customers who have invested in cryptocurrencies.

The RBI move will be a big respite for those Indians who have invested in cryptocurrencies like Bitcoin and Ethereum. The money estimated to have been invested in cryptocurrencies is around Rs 10,000 crore.

RBI's stand on cryptocurrencies

The RBI which is against virtual cryptocurrencies has warned people against such currencies several times in the past.

It said that entities regulated by the RBI shall not deal in VCs or provide services for facilitating any person or entity in dealing with or settling VCs.

The Reserve Bank of India's  2018 position was in view of the associated risks with cryptocurrencies.

Now, the Reserve Bank of India (RBI) has indicated it is getting ready to launch its own digital currency.

"Central bank digital currency is a work in progress. The RBI team is working on it, technology side and procedural side," Governor Shaktikanta Das said recently.

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