India’s high court is seeking a response from the Reserve Bank of India over a case challenging its decision to bar lenders from providing cryptocurrency related services.
The case was filed CoinRecoil, one of the cryptocurrency exchanges operating in India seeking to have the RBI directive quashed on the ground that it infringes their right to do business freely.
CoinRecoil wants the court to find the April 6 directive as arbitrary and unconstitutional. According to the petition, the RBI circular violates Article 14 and Article 19(1)(g) of the Constitution of India.
Under the constitution every person has a right “to practise any profession, or to carry on any occupation, trade or business.”
The GST Council and the Finance Ministry have also been asked to make a response. Other respondents include the Union of India and Goods and Service Tax Council
The circular which has attracted the ire of the large cryptocurrency community in the country prohibits 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.”
The petitioner charges that the GST Council has failed to introduce regulations touching on cryptocurrencies in the Goods and Services Tax Law. It also links the Union of India as having a part on the ban as it is represented through the Secretary, Ministry of Finance.
RBI Vague on Cryptocurrencies
CoinRecoil also faults the RBI for being vague on its description of cryptocurrencies.
“Virtual Currencies (VCs), also variously referred to as crypto currencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others,” the RBI circular reads.
“On account of the Impugned Circular, the Petitioner will not be able to avail banking services in connection with operating the cryptocurrency exchange. In the absence of banking services, the Petitioner will not be able to conduct the proposed business,” the petition says.
The fact that there is no specific regulation governing the sector in India puts the respondents at pains to explain their decision.
The hearing has been set for May 24.
Kali Digital Eco-Systems Pvt Ltd is planning to launch a crypto-fiat cryptocurrency exchange by the name Coinrecoil in August, 2018.
More Petitions on the Way
More exchanges are said to be planning to challenge the RBI directive in court. An online petition opposing the RBI move has already gathered more than 43,000 signatures. The petition criticizes the directive as being protection and anti-innovation.
“This is clearly stifling innovation around blockchain. If a government does not facilitate adoption of new technology the country stands to left behind. It’s not that a Google or an Apple gets created by a government,” the petition reads in part.