RBI circular barring banking service for cryptocurrencies challenged in HC
What's the story
The Delhi HC has sought the response of the Centre, the RBI, and the GST Council on a plea challenging a circular which prohibits banks and financial institutions from "providing any service in relation to virtual currencies such as cryptocurrencies." A bench of justices issued a notice to the Finance Ministry, the RBI, and the GST Council and sought their reply by May 24.
The plea
Plea filed by Gujarat-based company, Kali Digital Ecosystems Pvt Ltd
The order came on the plea by a Gujarat-based company, Kali Digital Ecosystems Pvt Ltd, which was proposing to undertake the business of operating a cryptocurrency exchange system for customers within India. The company has claimed that it has already undertaken substantial investment in this regard and planned to roll-out the exchange system, called "Coin Recoil", in August this year.
Information
Company claims it wouldn't be able to avail banking services
However, due to the April 6 circular issued by the RBI, the company claimed it would not be able to avail banking services, imperative for its business, to operate it, the petition has said.
Prohibitions
Three months time given to cease such activity
Under the circular, entities regulated by the RBI have been prohibited from "providing any service in relation to virtual currencies, including those of transfer or receipt of money in accounts relating to purchase or sale of virtual currencies," the plea has said. For entities which are already providing such services, three months time has been given to them to cease such activity, it said.
Information
Petition sought GST council to "frame appropriate regulation on cryptocurrencies"
Apart from seeking quashing of the circular on the ground that it is "arbitrary, unconstitutional, and violative of the Constitution", the petition has also sought a direction to the Goods and Services Tax (GST) Council to "frame appropriate regulation on cryptocurrencies".
The currencies
Cryptocurrencies are digital currency with encryption techniques
Cryptocurrencies are digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. The company has claimed that lack of regulations on cryptocurrencies has "increased the uncertainty over the treatment of such transactions and is adversely affecting the proposed business of the petitioner."