A petition has been filed in the Delhi High Court challenging the Reserve Bank of India’s notification banning banks and other regulated entities from servicing crypto exchanges and traders. The notification was issued following an RBI meeting on April 5th, 2018.
Reports have emerged that Kali Digital Eco Systems, the operator of an Ahmedabad based exchange called CoinRecoil, has challenged the notification contending a violation of Article 14 which confers the right to Equality and Article 19(1)(g) which grants freedom of profession. The exchange has also made the GST Council a party to the case for failing to frame taxation rules for cryptocurrencies.
The Indian government has not formally banned cryptocurrencies. However, different official agencies have taken actions to discourage the use of cryptocurrencies. The Income Tax department conducted surveys of cryptocurrency exchanges and investors in December 2017, reportedly sending notices to four to five lakh traders and investors. The Registrar of Companies stopped accepting the registration of cryptocurrency exchanges and various banks preempted the RBI by suo moto banning customers from using their cards for crypto payments.
However, an official committee appointed to look into the matters hinted that the Government would seek to regulate cryptocurrencies as assets rather than imposing an outright ban. However before the committee could submit its report, the RBI stopped crypto currency exchanges and traders from using the banking system.
It is estimated that over 50 lakh Indians have invested over $4 billion in cryptocurrencies. The RBI ban may have frozen much of this money or rendered it illiquid, potentially jeopardising the property rights of crypto investors. Other constitutional rights such as the freedom of profession under Article 19(1)(g) and the right to equality under Article 14 may also have been violated.
The central bank gave banks having existing relationships with crypto exchanges three months to unwind the relationships. The RBI decision may have also caused a panicky withdrawal of money from cryptocurrency exchanges, exposing investors to security threats. A major theft of bitcoin worth Rs 20.5 crore took place at New Delhi based exchange, Coinsecure on 12th April 2018.