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RBI confirms a loophole for Crypto exchanges to legally work with a bank

Yesterday, a major revelation was made when an RTI document from there RBI was made public said they had no committee formed to look into Cryptocurrencies. However, that did not stop them from imposing a ban on banks registered with them to stop doing business with crypto companies.

Though the RBI not forming a committee was the biggest news, the document had more to it which shed some light on other matters regarding cryptocurrencies. The one which caught our eye was question 2f.

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The State Bank of Sikkim was formed by the government of Sikkim and does not come under RBI’s purview. The state bank of Sikkim is not licensed under the Banking Regulation Act, 1949 that all other banks have to follow. It was formed in 1968, but Sikkim joined India only in 1975. Therefore, the state of Sikkim enjoys a special status under article 371F of the constitution.

With the recent RTI, RBI just confirmed that crypto exchanges will be able to legally work with State Bank of Sikkim. They claimed they had no specific information regarding this. However, it confirmed that the Star Bank of Sikkim is not licences under the RBI and the Banking Regulation Act, 1949 is not applicable for them.

The ban on banks dealing with crypto businesses has not yet been enforced by the RBI. Though it was not clear if exchanges would use State Bank of Sikkim to conduct business, the bank itself will have to agree to it. If the bank ends up helping Cryptocurrency exchanges, the RBI has no way of stopping them from doing so.

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An early Blockchain/Crypto enthusiast who has been a part of the scene for a long time.

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