A central bank circular banning cryptocurrencies is being challenged in the Delhi High Court, with a court hearing fixed for May 24. The Reserve Bank of India (RBI) issued a circular on 6 April entitled ‘Withdrawing Banking Support to Virtual Currency Exchanges’. The court has reportedly issued a notice to the RBI, the Ministry of Finance and the Goods and Services Tax (GST) Council alleging that RBI’s decision to end dealings with crypto businesses violates the constitution.

Prohibition

The circular essentially prohibits '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,' according to the petition issued on behalf of Ahmedabad-based cryptocurrency exchange CoinRecoil (Kali Digital Eco-Systems Pvt Ltd). Entities which are already providing such services are given three months to cease such activity. CoinRecoil requested the high court to issue an appropriate direction to quash the RBI circular as 'arbitrary, unconstitutional.'

Arbitrary decision

Kali Digitial was proposing to undertake the business of operating a crypto-currency exchange system for customers within India, and claims that it has already undertaken substantial investment and planned to roll-out the exchange system called ‘Coin Recoil’ in August. However, due to the RBI circular, the firm claims it will not be able to use essential banking services to operate the service. The firm is seeking the quashing of the circular on grounds that it is 'arbitrary, unconstitutional and violative of the Constitution.' In addition, the petition is also seeking a direction to the Goods and Services Tax (GST) Council to 'frame appropriate regulation on crypto-currencies.'