The Delhi High Court has demanded a response from the Reserve Bank of India (RBI) after a crypto currency exchange operator filed a petition insisting that RBI’s circular banning financial institutions from engaging in all forms of digital currency businesses is in contravention of Indian law.
The court order arrived after Ahmedabad-based CoinRecoil (Kali Digital Ecosystems Pvt Ltd) asked the High Tribunal to declare RBI’s circular of April 6, 2018 as unconstitutional. The document was issued under the title “Withdrawing Banking Support to Virtual Currency Exchanges.”
On April 16th 2018, CoinRecoil delivered a summoning petition before the Delhi High Court to challenge the circular.
As a re-action to the petition, Khaitan & CO associate partner Rashmi Deshpande commented:
“The move by the RBI has put the burgeoning crypto currency 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 crypto currencies. 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.”
The RBI circular bans financial institutions 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.”
Justices S Ravindra Bhat and AK Chawla issued a notice to the RBI, the finance ministry, and the GST Council, requesting that they comment on the petition by CoinRecoil. The Delhi High Court has scheduled the next hearing for May 24, 2018.
In the previous week, a number of crypto currency exchanges in India came out to challenge RBI’s circular and said they wanted to meet with the central bank before proceeding to the Supreme Court to formally petition against it.
A representative of a digital exchange stated:
“We are looking at filing a petition to challenge the RBI’s order. At the moment we are working on it and trying to figure out if we should get together with the other exchanges and do it collectively,”
Tim Draper a bitcoin investor, described RBI’s anti-crypto currency stance as a big mistake, saying the country’s hostile behavior towards the asset class would result in symbolic loses.