Bitcoin exchanges in India have launched a joint legal action against the Reserve Bank of India’s decision to ban banks from any dealings with cryptocurrencies.
The directive cut digital currency exchanges off from the banking network and effectively closed their businesses.
In April, the central bank sent a circular out telling exchanges to stop trading with immediate effect.
“Entities regulated by the Reserve Bank shall not deal in virtual currencies or provide services for facilitating any person or entity in dealing with or settling virtual currencies,2 said the notice.
“Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them, transfer or receipt of money in accounts relating to purchase or sale of virtual currencies.”
Virtual currencies not illegal
More than a dozen exchanges have signed up to the legal challenge in India’s Supreme Court.
They claim the ban is unfair and uncalled for as virtual currencies are not illegal in the country.
“Banking is an essential service. How can one deny access to an essential service when I am not doing anything illegal? You have not declared virtual currencies illegal in the country,” said a spokesman.
The bank ordered the exchanges to cease trading by July 5. The impending deadline has triggered the action in the courts.
Many digital currency traders have turned to crypto-to-crypto trading to cut the banks out of the process.
Ban stops criminals, says government
“Even if there was no Reserve Bank of India circular, the crypto to crypto product would have happened. However, because of the circular and the fact that fiats may no longer be in the picture, it hurried the process and encouraged the solution sooner,” said Ajeet Khurana, the CEO of exchange Zebpay.
The government claims the ban was put in place to stop “anti-national, illegal and nefarious activities such as terrorism funding, illegal trade of arms and drugs, bribery, money laundering, tax evasion, payment of ransom etc” and that cryptocurrency trading violates several financial laws.
Although exchanges have issued a writ to protect their businesses, no investors have laid papers before a court questioning the validity of the ban.