Responding to CoinRecoil petition on crypto trading, Delhi HC issues notice to RBI and others

Days after the RBI barred banks from dealing in cryptocurrency, the Delhi High Court has issued a notice to the Reserve Bank of India, the Union of India, Ministry of Finance and GST Council on the matter.

The notice was issued in response to the petition filed by cryptocurrency exchange CoinRecoil last week. The Ahmedabad-based exchange, which is scheduled to launch in August this year, is building FIAT-to-Crypto platform for buying, selling and storing digital assets.

In the petition, CoinRecoil requested the High Court to issue an appropriate writ quashing the circular issued by the RBI withdrawing banking support to virtual currency exchanges. The petitioner claimed the circular to be arbitrary, unconstitutional and violative of Article 14 and Article 19(1)(g) of the Constitution of India, 1950.

According to the company's press statement, CoinRecoil in its petition also included the Union of India and Goods and Service Tax Council responsible for the current turmoil in the cryptocurrency sector.

The Union of India, represented through the Secretary, Ministry of Finance (Department of Economic Affairs) granted powers to RBI to issue the impugned circular. Besides, GST Council failed to introduce appropriate regulations with respect to cryptocurrencies in the Goods and Services Tax law.

Two weeks ago, the RBI released a statement directing all regulated entities, including banks, e-wallets, and payment gateway providers to stop dealing with individuals and businesses in the partially banned cryptocurrencies.

The uncertainty over the legality of cryptocurrency has been continuing for long in India.

Late last year,  the government asked consumers to be alert before investing in virtual currency like Bitcoin and compared it with notorious Ponzi schemes.

In February 2018, Finance Minister Arun Jaitley in his budget speech mentioned cryptocurrency and said the government does not recognise cryptocurrency as legal tender or coin.

However, to bring some clarity on the legality, Economic Affairs Secretary Subhash Garg-led panel was expected to submit its report containing regulations and explanations on how to deal with cryptocurrencies by April this year.

Before the submission of the report, the new circular by the RBI has further opaqued the cryptocurrency trade in India. Since the Delhi High Court has issued notices to apex banking regulator and other government machinery, it would be interesting to see how they react to CoinRecoil petition.