RBI - Customer Due Diligence for transactions in Virtual Currencies (VC)

Last updated: 02 June 2021

Save Share

Quick Summary

The Reserve Bank of India (RBI) has issued a notification clarifying that previous circulars cautioning against virtual currency transactions are no longer valid. This is due to a Supreme Court ruling in March 2020 that set aside the RBI's 2018 circular. Banks and other regulated entities must now conduct customer due diligence for virtual currency transactions in line with existing Know Your Customer (KYC), Anti-Money Laundering (AML), and Combating Financing of Terrorism (CFT) regulations.

Reserve Bank of India

RBI/2021-22/45
DOR. AML.REC 18 /14.01.001/2021-22

May 31, 2021

All Commercial and Co-operative Banks / Payments Banks/ Small Finance Banks /
NBFCs / Payment System Providers

Madam / Dear Sir,

Customer Due Diligence for transactions in Virtual Currencies (VC)

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 RBI circular DBR.No.BP.BC.104/08.13.102/2017-18 dated April 06, 2018. Such references to the above circular by banks/ regulated entities are not in order as this circular 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). As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from.

2. 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.

Yours faithfully,

(Shrimohan Yadav)
Chief General Manager

FAQ :

No, the RBI's circular dated April 6, 2018, which cautioned against dealing in virtual currencies, was set aside by the Supreme Court on March 4, 2020, and is therefore no longer valid.

Banks and regulated entities must continue to perform customer due diligence processes for virtual currency transactions, adhering to regulations for Know Your Customer (KYC), Anti-Money Laundering (AML), and Combating Financing of Terrorism (CFT).

Yes, in addition to KYC, AML, and CFT, entities must ensure compliance with relevant provisions under the Foreign Exchange Management Act (FEMA) for overseas remittances.

The clarification is based on the order of the Hon'ble Supreme Court in the matter of Writ Petition (Civil) No. 528 of 2018 (Internet and Mobile Association of India v. Reserve Bank of India).

Guest

Notification No : RBI/2021-22/45 DOR. AML.REC 18 /14.01.001/2021-22
Published in Community & General
Source : https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12103&Mode=0

Share Report Abuse

Comments