RBI told banks not to cite its set-aside 2018 crypto circular

The Reserve Bank of India told banks and other regulated entities on May 31, 2021, that they could not cite its April 6, 2018 virtual-currency circular when cautioning customers about cryptocurrency activity. The Supreme Court of India had set that circular aside on March 4, 2020, making it invalid from the date of the judgment, the central bank said.

The clarification mattered because access to ordinary banking services remained a practical bottleneck for Indian cryptocurrency customers and exchanges. It removed one obsolete regulatory basis for restricting that access, but it did not legalize cryptocurrency, compel banks to serve crypto businesses or signal that the RBI had endorsed digital assets.

The restriction RBI said could no longer be cited

RBI’s April 6, 2018 circular had directed commercial and cooperative banks, payment banks, small-finance banks, nonbank financial companies and payment-system providers not to deal in virtual currencies or facilitate other parties’ dealings. The listed services included maintaining accounts, settling trades, lending against virtual tokens, accepting them as collateral and transferring money connected to virtual-currency purchases or sales. Existing relationships were to be exited within three months.

In Internet and Mobile Association of India v. Reserve Bank of India, the Supreme Court set the 2018 circular aside on March 4, 2020. The court’s judgment concerned RBI-regulated access to banking services; it was not a legislative declaration that every cryptocurrency activity was lawful or regulated.

RBI Circular 2021-22/45 addressed the operational residue of that judgment. The central bank said media reports had brought to its attention that some regulated entities were still warning customers about virtual currencies by referring to the superseded 2018 direction. RBI described those references as improper and stated that the former circular could no longer be cited or quoted.

Compliance obligations remained

The May 31 clarification preserved a separate compliance track. RBI said covered entities could continue customer-due-diligence procedures under know-your-customer, anti-money-laundering and counter-terrorist-financing standards. It also identified obligations under the Prevention of Money Laundering Act, 2002, and relevant Foreign Exchange Management Act provisions for overseas remittances.

That distinction limits the defensible interpretation. RBI withdrew no KYC or financial-crime controls, and the circular did not direct a bank to approve every transaction or customer relationship. A regulated institution could still make risk and compliance decisions under valid rules; it simply could not present the judicially set-aside 2018 circular as operative RBI authority.

The institutional context was unsettled. Reuters reported on May 13, 2021, citing three unnamed sources, that RBI had informally urged lenders to reconsider relationships with cryptocurrency exchanges and traders. That account was a contemporaneous report rather than a published RBI directive. The May 31 circular, by contrast, was an attributable written instruction and therefore provided a firmer statement of what regulated institutions could not rely upon.

What May 31 did—and did not—settle

For exchanges and customers, the immediate significance was narrower than descriptions of an Indian “crypto unban.” The Supreme Court had already removed the 2018 banking restriction on March 4, 2020. The May 31, 2021 development was RBI’s explicit instruction that regulated entities stop invoking that restriction, prompted by reports that some continued to do so.

The circular did not resolve India’s broader legislative treatment of cryptocurrency, establish consumer protections for crypto trading, classify particular tokens or guarantee uninterrupted banking access. Those questions required separate laws, regulations or institutional decisions.

Later context

On June 4, 2021, RBI Governor Shaktikanta Das said the central bank’s position on cryptocurrency had not changed and reiterated its financial-stability concerns. He described the May 31 circular as an effort to make clear that the 2018 direction had become invalid. That later statement supports the restrained reading: the circular corrected banks’ use of obsolete authority without reversing RBI’s broader policy concerns.