Bitcoin exchanges may follow Ahmedabad-based CoinRecoil to take legal recourse against the Reserve Bank of India’s direction asking banking and other regulated entities to bar transactions related to cryptocurrencies.
Legal experts consulting bitcoin exchanges are of the view that the case filed by CoinRecoil had merit.
Freedom of trade
Talking to BusinessLine, Prateek Bagaria, a partner at law firm Singularity Legal, said that CoinRecoil’s argument holds water as the petition has been filed under Article 14 and Article 19 (1) (g) that talks about equal protection and freedom of trade, respectively.
“RBI’s direction seems like a violation of Article 14 and Article 19. Besides, the petition also talks about RBI’s direction on cryptos as unreasoned and, hence, can very well be challenged in court. However, the RBI can always say that it is a policy-based decision. We will just have to wait and watch as the whole space is new and full of challenges not only in India but also globally,” said Bagaria.
While most of the bitcoin players are keeping their cards close to their chest for now, Zebpay, the largest player in the Indian crypto space, said it is examining all options. Ajeet Khurana, CEO of Zebpay, told BusinessLine : “We are presently evaluating all our options and will act shortly. We don’t want to take any action that we would regret later.”
Bitcoin players have gained confidence after the Delhi High Court issued a notice to the Reserve Bank of India, the Union of India, Ministry of Finance and GST Council, following a petition filed by CoinRecoil. The RBI, on April 1, had directed all banks to stop dealing with individuals or companies dealing with virtual currencies such as bitcoin, ripple or ethereum, among others.
The Ahmedabad-based exchange, which was incorporated on March 15 a couple of weeks before the RBI’s clampdown on crypts, filed a case against the regulator for passing a directive without giving any valid reason or justification.
Rashmi Deshpande, Associate Partner, Khaitan & Co, said: “The move by the RBI has put the burgeoning cryptocurrency sector in jeopardy and may affect the basic rights of such entities to carry on any trade. The circular appears to be arbitrary and unconstitutional since it does not give strong facts as to why the RBI is against the business of cryptocurrencies. Logical and well-thought-out arguments, backed by solid facts, are the primary requirements under the Constitution to put a stop to any business in India.”
Gopal Modi, founder of CoinRecoil, said that he will not be able to comment till the next hearing on May 24.