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Cryptocurrency clarity coming to India as high court gets involved

Posted: 23 April 2018 2:02 pm
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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.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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