The Delhi High Court demanded the response of the Ministry of Finance, the Reserve Bank of India (RBI) and Tax Council on a plea challenging RBI’s decision to ban banks and financial institutions from providing any service related to crypto-currencies, issued earlier this month.
The petition was filed by Kali Digital Eco-Systems, which had plans to launch its own cryptocurrency exchange, CoinRecoil, in August 2018.
However, due to the April 6 circular issued by the RBI, the company claimed it will not be able to avail banking services, imperative for its business, to operate it, the petition has said.
The plea said in case of regulated entities already in the business of virtual currency services, a time limit of three months was given by the RBI to cease such services. It sought quashing of the circular on the ground that it is “arbitrary, unconstitutional and violative of the Constitution”.
The Reserve Bank of India (RBI) issued a circular on April 6 ‘Withdrawing Banking Support to Virtual Currency Exchanges’.
The RBI notice was applicable to banks, mobile wallets holding a payment instrument licence, as well as any entity holding an RBI licence. Banks were also given three months to settle all outstanding payments with crypto exchanges in India.
"In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs (virtual currencies),” the bank said in a statement.
India-based cryptocurrency trading volume had already decreased by 90% in recent months as banks themselves had already begun to restrict the ability of cryptocurrency exchanges.
By Jade Olafson