Latest RBI Stand On Cryptocurrency / Bitcoin - June 2021

Latest RBI Stand On Cryptocurrency / Bitcoin - June 2021

On the backdrop of a blanket ban on cryptocurrency in China, some leading Indian banks had recently sent out cautionary emails to their customers warning them against dealing with cryptocurrencies / bitcoin.

Recently many of our clients got the following message from the banks:

Dear Customer, Greetings from XXXX Bank. This refers to the transactions made on your HDFC Bank Account number: XXXXXXXXXX0743.

We have observed that your account reflects probable Virtual Currency transactions which are not permitted as per RBI guidelines. 

To comply with the regulatory guidelines (RBI vide guidelines DBR.No.BP.BC.104 /08.13.102/2017-18 dated April 06,2018), the Banks are advised to exercise due diligence by closely examining the transactions carried out in the account on an ongoing basis.

RBI has also highlighted that Regulated entities shall not deal in Virtual Currencies (VCs) or provide services for facilitating any person or entity in dealing with or settling VCs and banks need to exit relationship with such customers. 

Request you to visit the nearest XXXX Bank branch within 30 days of the date of this communication to clarify the nature of these transactions: 

In case we do not hear from you, the bank will be compelled to restrict transactions in your account without any further notice. 

We look forward to meeting you at the earliest. Assuring you of the best of our services at all times. 

Above advisory issued to many customers dealing in cryptocurrency / bitcoin referred to the discarded 2018 circular which had directed banks to closely monitor the transactions carried out in the account of such customers on an ongoing basis.  This led to confusion among the crypto traders in India . The circular was put aside by the Supreme Court in March 2020. 

RBI on its part was quick to react and directed banks to stop making references to the invalid circular.

What did RBI say?

References made by Banks or regulated entities to RBI’s earlier circular prohibiting dealing in virtual currencies are not in order since the same has been set aside by the Hon’ble Supreme Court by a judgment in the case of Internet and Mobile Association of India v. Reserve Bank of India; the clarificatory circular issued by RBI said.

Click here for official notice

Although "NOT illegal", RBI does not endorse cryptocurrencies 

Although cryptocurrency is not illegal in India, RBI has time and again expressed concerns over cryptocurrencies & bitcoin. The same was reiterated by the RBI during a recent press conference. 

We believe the reasons for the persistent concern extend far beyond a lack of understanding of crypto technology. 

Mainly, the regulatory authorities are not in favour of a decentralized system of currency exchange that eliminates the banking channel altogether.

Instances of cryptocurrency used for money laundering and terror financing have are very big and genuine concerns. 

Indian Government is looking into different possibilities

Cryptocurrency is based on blockchain technology and if forecasts of the world economic forum are taken into consideration, 10% of the global GDP will be stored on blockchain by 2025. In terms of annual business value, blockchain is expected to generate business value to the tune of US $3 trillion by 2030. 

Realizing the immense possibilities of capital appreciation and wealth creation the disruptive crypto technology brings, the government is working towards bringing the "Digital Rupee" to life without the risks associated with private cryptocurrencies. On the regulatory front, the government has been fine-tuning its existing laws to bring cryptocurrencies under some form of regulation while simultaneously working on a full-fledged cryptocurrency law which has been in the making for quite some time now. 

India needs to catch up with technology fast.

While, the Government has plans to launch India’s private blockchain-based digital rupee and a Bill to ban all other private cryptocurrency pending with the parliament, the recent and frequent changes brought by the Government such as crypto disclosure requirements for corporates under the Companies Act, 2013 and RBI notification of May 31, 2021, asking Banks to exercise customer due diligence for transactions in virtual currencies, suggests that India is preparing not to miss this bus.

SERVICES BY CA MITESH AND ASSOCIATES

• CA MITESH AND ASSOCIATES are constantly increasing their knowledge in cryptocurrency to provide better services and advisory to their clients.
• Many industries would be on the verge of disruption with the introduction of cryptocurrency, therefore there is a need to formulate the strategy in a more careful and systematic manner.
• We are continously working on the different aspects of taxation under Income Tax for any income arising from any Blockchain or cryptocurrency exchange. Thus, the Indian investors are benefitted as any investment, trade, mine, run nodes in any cryptocurrency would be easily handled and be taxed accordingly by the experts.
• In case a person is already owning or trading in Cryptocurrencies / Bitcoin, they are required to include such income or profits thereon, in their tax returns irrespective of the amount. We at CA MITESH AND ASSOCIATES are capable enough to appropriate the profits arising from crypto trading under the heads of capital gains and losses and providing with the data and forms required to file their taxes.
• All work is done or supervised by qualified CAs therefore providing utmost professional service to our clients. 

The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that we are not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. CA Mitesh and Associates is Mumbai's leading Cryptocurrency Taxation Firm which is committed to helping people navigate complex tax laws and banking regulations. Our main aim is to assist the individuals with applicable laws & regulations compliance and providing support at each & every level to make sure that they stay compliant and grow continuously. For any query, help or feedback you may get in touch here - Appointment with CA. Please note the all consultations with the CA are Paid consultations.

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