The Delhi High Court has sought a response from the RBI, the Centre, and the GST Council on a plea challenging a circular prohibiting financial institutions from providing any service relating to virtual currencies.
The Delhi High Court has sought the response of the Reserve Bank of India (RBI), the Centre, and the GST Council on a plea challenging a circular that prohibits banks and financial institutions from providing any service in relation to virtual currencies such as cryptocurrencies.
The court was responding to the petition of Ahmedabad-based cryptocurrency exchange CoinRecoil (Kali Digital Eco-Systems Pvt Ltd) challenging RBI’s circular, 'Withdrawing Banking Support to Virtual Currency Exchanges,' dated April 6, 2018.
CoinRecoil.com had filed a writ petition on April 16, 2018, challenging the RBI circular, where it requested the high court to issue an appropriate writ, order, or direction quashing circular bearing reference number DBR.No.BP.BC.104/08.13.102/2017-18, dated April 6 , 2018, to be arbitrary, unconstitutional, and violative of Article 14 and Article 19(1)(g) of the Constitution of India, 1950 (“Constitution of India”).
A bench comprising Justice S Ravindra Bhat and Justice AK Chawla also issued a notice to the RBI, the Finance Ministry and the GST Council and sought their stand on the petition challenging the RBI April 6 circular ‘Withdrawing Banking Support to Virtual Currency Exchanges’.
Under the circular, these entities have been prohibited from “providing any service in relation to virtual currencies, including those of transfer or receipt of money in accounts relating to purchase or sale of virtual currencies”.
The next hearing in this case is on May 24, 2018.
Not the just RBI, the company also included Union of India and Goods and Service Tax Council as respondents in its petition, which stated that Union of India, represented through the Secretary, Ministry of Finance (Department of Economic Affairs), had granted powers to RBI to issue the impugned circular while the GST Council had failed to introduce appropriate regulations with respect to cryptocurrencies in the Goods and Services Tax law.
Speaking on the matter, Rashmi Deshpande, Associate Partner, Khaitan & Co. said,
“The move by the RBI has put the burgeoning cryptocurrency sector in jeopardy and may affect the basic rights of such entities to carry on any trade. 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. A 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.”
Last week, it was reported that even cryptoexchange Unocoin was planning to challenge the RBI over withdrawal of banking support to crypto-exchanges.
At present, Kali Digital Eco-Systems Pvt Ltd is building a FIAT-to-Crypto platform for buying, selling, and storing digital assets with the trade name of CoinRecoil. The official launch of CoinRecoil is scheduled for August 2018. The company is planning to expand operations to Canada, Singapore, UAE, and Australia.