In a massive development for crypto traders in India, the Reserve Bank of India (RBI) has said that banks or other financial entities cannot cite RBI's 2018 order that barred them from dealing with virtual cryptocurrencies. It said its banking ban circular is no more valid after the Supreme Court order that set aside RBI's ban order in March 2020.  

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The development comes after media reports suggested that many banks have been cautioning customers against dealing in virtual currencies citing RBI 2018 circular that barred banks from indulging in business with crypto exchanges. The Reserve Bank said the circular is no longer valid since the date of the Apex court judgement on the matter. " 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," said the Central Bank. 

However, the RBI also asked banks and concerned entities to 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. 

Earlier, many media reports, including ET, claimed that Cryptocurrency exchanges were mulling the option to move the Supreme Court after several banks reportedly warned traders and denied them services of virtual currency exchanges. Many crypto exchanges have been also flagging the issue of payment gateway error, citing problems with their banks or payment partners. 

This has also cleared the air around crypto trading in India and reaffirmed the fact that trading in cryptocurrencies is not banned in India, but it is an unregulated domain.  

Find the full text of RBI circular, dated May 31, 2021 

"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"