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Reserve Bank of India Governor Shaktikanta Das recently said that the RBI has conveyed its “serious and major concerns” over virtual currencies (VCs) to the government. The so-called concerns over cryptocurrency are misplaced at best and smack of the central bank’s statist approach at worst.

On March 4, 2020, a three-judge bench of the Supreme Court had quashed the ban that the RBI had imposed on trading in cryptocurrencies like Bitcoin in April 2018.

On May 31 this year, the RBI had directed banks not to cite its 2018 ban as a reason to deny banking services to customers dealing in cryptocurrency. “It has come to our attention through media reports that certain banks/regulated entities have cautioned their customers against dealing in virtual currencies” by making a reference to the ban it had imposed, an RBI circular said.

So, it took almost a year for the RBI to realize, and that too from media reports, that the entities regulated by it still regarded virtual currencies as proscribed. This is surely not a mark of the banking regulator’s efficiency.

It directed the banks that following the apex court order, the earlier circular proscribing virtual currencies was no longer valid. The circular went on to add, “Banks, as well as other entities addressed above, may, however, 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.”

Banks continued to caution their customers against dealing in cryptocurrencies because the RBI, despite the SC verdict, has persistently campaigned against the innovation. In the last week of February this year, Das raised concerns over VCs. The next month he again said the RBI had major concerns. Then again in June. His opposition to cryptocurrency seems to be the zeal of an activist rather than the reservation of a statutory regulator regarding an issue.

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