The Reserve Bank of India asks banks not to refer to the withdrawn crypto ban, may have little practical impact

The Reserve Bank of India has issued a new notice to banks in the country, reminding all banks in the country not to refer to the cryptocurrency ban that was lifted by the Supreme Court of India last year.

The Story Behind the Reserve Bank of India's Ban

In April 2018, the Reserve Bank of India (RBI) issued a notice prohibiting banks in the country from providing services to individuals or entities dealing with or settling in cryptocurrencies. However, after prolonged efforts by cryptocurrency institutions in the country, the Supreme Court of India ruled in March of last year that the central bank's ban lacked substantive power. Banks were free to transact with cryptocurrency companies if they were willing. Despite the court ruling, most major banks in India still hold biases against cryptocurrency exchanges.

It seems that even the Reserve Bank of India has disregarded the ruling and issued an informal notice to banks last week, leading some banks to withdraw their services to cryptocurrency exchanges. As a result, almost all exchanges in the country were forced to halt their fiat operations. To protect their interests, local exchanges have threatened to take the Reserve Bank of India to court again. Ultimately, the Reserve Bank of India relented, with Shrimohan Yadav, General Manager of the Reserve Bank of India, issuing a newnotification stating:

"In view of the orders of the Supreme Court, this notification (referring to the ban) is no longer valid from the date of the Supreme Court judgment and therefore cannot be cited."

Sidharth Sogani, CEO of Indian cryptocurrency research firm CREBACO, stated in an interview that the Reserve Bank of India was merely trying to avoid legal issues arising from the threat of lawsuits.

Unlikely to Bring Substantial Impact

While this news may seem like a positive development for India's cryptocurrency market, the Reserve Bank of India still does not encourage banks to collaborate with cryptocurrency companies, and there is no indication that today's notification will bring about substantial changes in the market. Zakhil Suresh, founder of the cryptocurrency trading simulator SuperStox, stated in an interview:

"Many bank managers have confided in me that their lack of support for cryptocurrency businesses is not due to the Reserve Bank of India, but their own internal compliance policies."

Zakhil Suresh pointed out that these bank policies have a significant impact on the entire cryptocurrency industry, with even employees' bank accounts being frozen for engaging with cryptocurrency exchanges. While some smaller banks may still support cryptocurrency-related businesses for performance reasons, they generally cannot provide the complex APIs required by cryptocurrency exchanges. Without large banks willing to collaborate with cryptocurrency companies, the industry's development is likely to face challenges.