Ahead of its planned launch of a cryptocurrency exchange, an Indian crypto startup has filed a writ petition challenging the central bank’s mandate of stopping banks from providing services to the sector.
Deeming the recent Reserve Bank of India (RBI) policy of prohibiting banks from dealing with cryptocurrency companies as “unconstitutional”, Kali Digital Ecosystems has filed a writ petition at the Delhi High Court seeking to quash the central bank’s order.
The company, a registered private limited, had planned to launch a cryptocurrency exchange called ‘Coin Recoil’ in August 2018, adding it has “already undertaken [a] substantial investment in this regard”, in the writ petition reviewed by CCN.
However, the RBI mandate forcing banks to stop providing services to crypto companies means Kali Digital will not be able to launch or operate the exchange.
An excerpt from the petition read:
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.
As a result, the filed petition directly takes on the RBI, India’s Ministry of Finance (Department of Economic Affairs) and the Goods and Service Tax Council, blaming the tax authority of failing to introduce appropriate GST tax laws for the treatment of cryptocurrencies.
Furthermore, the petition has accused the RBI circular to banks as an “arbitrary and unconstitutional” as well as discriminatory due to “differential treatment” given to the cryptocurrency startup.
Furthermore, the inherent ambiguity present in adequately defining ‘cryptocurrency’ by the RBI- there’s no clear definition of what constitutes a cryptocurrency – could also mean that airline miles may be mistakenly deemed under the term, the petition argued.
As reported earlier this month, the RBI’s crackdown has seen trading volumes through popular exchange platforms plummet in recent weeks. Inversely, trading through peer-to-peer platforms like LocalBitcoins have spiked.
The RBI circular mandating the banking blockade comes after three notices urging the public to be wary of cryptocurrency investments. CCN reported on the first warning in December 2013, followed by two separate notices – essentially a rehash of the 2013 warning – in 2017.
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Last modified: May 20, 2020 8:52 PM UTC