Cryptocurrency clarity coming to India as high court gets involved
A legal challenge from an exchange to India's Reserve Bank is set to clear things up – one way or another.
The Reserve Bank of India (RBI) took a significant, but not unprecedented step, last week with the decision to cut ties between cryptocurrency exchanges and established banks. The overall effect would be to prevent exchanges, and therefore their customers, from making cryptocurrency-related transactions with bank products like credit cards, bank accounts and similar.
One of the exchanges, CoinRecoil, through its parent company Kali Digital, filed a high court petition claiming the move to be "arbitrary, unconstitutional and violative of the Constitution." It also included the goods and services tax (GST) council in its petition, calling on it to "frame appropriate regulation on cryptocurrencies."
The gist of Kali Digital's arguments against both the RBI ban and the GST Council's lack of tax frameworks for digital currencies is that they unconstitutionally infringe on their right to operate a business, and that the CoinRecoil exchange, previously set to launch in August, would be "stillborn."
On 22 April, The Delhi High Court passed the matter onto the RBI and GST council for response.
According to Mohit Singh, legal advisor and CEO of Ovakil.com, Kali Digital might have a valid point.
"With this RBI restriction on banks to transact with cryptocurrency traders and exchanges, Article 301 of Indian Constitution also gets violated," he said. Article 301, Singh says, guarantees the freedom of trade and commerce throughout India, and before the RBI can legally cut off financial services, it has to ban the entity.
However, Rishabh Mastaram, founder of RGM Legal, points out that this might be doable.
"As per law, only RBI can issue currency and that is where they are running afoul of the law of the land," he says. "The RBI had in the past clearly expressed that it would not recognise such cryptos."
The high court has asked the RBI and GST Council to respond by May 24. Whichever way this case goes, it seems like it will put cryptocurrencies on more stable ground in India, either with a much harder anti-crypto crackdown or with the reintroduction of banking services for exchanges. One way or another, it will be getting out of the grey area it currently inhabits.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, BTC and NANO.