ICICI Bank has warned its clients not to utilize the RBI’s liberalized remittance scheme (LRS) for crypto-related investments, after shutting down most banking services for crypto exchanges.
The bank has revised its ‘retail outward remittance application form’ as part of the FEMA declaration, requiring clients to swear that the intended investments will not be used to acquire cryptocurrencies.
“The above remittance is not for investment / purchase of bitcoin/cryptocurrencies/virtual currencies (such as ethereum, ripple, litecoin, dash, peercoin, dogecoin, primecoin, chinacoin, ven, bitcoin or any other virtual currency/cryptocurrency/bitcoin).” according to the declaration.
It also says that the funds are not to be used to invest in mutual fund units/shares or indeed any financial asset of a firm dealing in bitcoins/cryptocurrency/virtual currencies. The suggested remittance’s source of money is not earnings from the redemption of cryptocurrency/bitcoins/virtual currencies and also end-users of. Users of ICICI Bank must agree to all of these conditions in order to utilize the LRS. LRS has been a popular place to invest in cryptocurrencies.
“With ICICI Bank having come up with such a declaration, other major banks will shut the LRS doors for crypto investments. This will impact the value of transactions of the Indian crypto market.” a crypto exchange creator, declining to be identified.
Under the legislative framework of the Foreign Exchange Management Act of 1999, the LRS was launched on February 4, 2004, with a $25,000 maximum. So, under Liberalised Remittance Scheme, Authorised Dealers may freely allow remittances by resident individuals up to $250,000 per financial year (April-March) for any permitted current or capital account transaction or a combination of both. Corporates, partnership businesses, HUFs, Trusts, and other entities are not eligible for the Scheme.
Remittances for current account transactions such as private visits, gifts/donations, business trips, foreign studies, and so on are included/subsumed in the $250,000 limit. However, cryptocurrency was not included in the list of banned products. Many individuals are seeking to invest their money in crypto, according to Mohandas Pai, the partner at Aarin Capital and former Infosys CFO. However, the majority of people are unsure what would happen in India. As a result, they invest in crypto via the liberalized remittance scheme (LRS), which they do outside of India because the Indian government does not allow it here on several grounds.