Delhi High Court Challenges RBI’s Circular Barring Cryptocurrency Services
The Reserve Bank of India (RBI), the Goods and Services Tax (GST) Council and the Ministry of Finance have been issued a notice by the Delhi High Court challenging a circular that bars financial lenders from providing services to cryptocurrency exchanges.
The notice from the High Court is reportedly in response to a claim filed by Kali Digital Eco-Systems, which was planning to launch its own cryptocurrency exchange, CoinRecoil, in August 2018, reports The Times of India.
On the 5th April, though, India’s central bank issued a notice, taking decisive steps against the cryptocurrency market.
At the time, a statement from the RBI read:
“It has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or selling VCs [Virtual Currencies.] Regulated entities which already provide such services shall exit the relationship within a specified time. A circular in this regard is being issued separately.”
The time that businesses have to cease their relationships with digital currency firms is by July this year. According to Kali Digital, the RBI’s directive means that it would not be able to deliver banking services, vital for its business, to operate. As a result, an online petition was launched to reverse the ban. At the time of publishing, it has over 43,500 signatures.
The claim filed by Kali Digital, states that the RBI’s order is unconstitutional and violates Article 19(1)(g), which allows citizens to enjoy the right to carry on any occupation, trade, or business; and Article 14, which prohibits discrimination and mandates equal protection under the law for all.
“The circular appears to be arbitrary and unconstitutional since it does not give strong facts as to why RBI is against the business of cryptocurrencies. Logical and well-thought argument backed by solid facts are the primary requirements under the constitution to put a stop to any business in India,” said Rashmi Deshpande, associate partner at Khaitan & Co, a law firm that is representing Kali Digital Eco-Systems, reports Quartz
Aside from India’s central bank that Kali Digital’s claim targets, it also includes the Ministry of Finance and the GST Council. According to the Times of India, the petition is seeking direction from the GST Council to ‘frame appropriate regulations on cryptocurrencies.’ Kali Digital believe that it is this lack of regulation that has ‘increased the uncertainty over treatment of such transactions and is adversely affecting the proposed business of the petitioner.’
Responding to RBI’s circular on Twitter, user Pomp, said:
“This won’t be the last time the existing financial system violates the rights of citizens to try to protect their monopoly.”
A reply is sought by the 24th May.