Bitcoin traders move SC against RBI's directive on stamping out cryptocurrencies

A group of bitcoin traders has moved the Supreme Court over the Reserve Bank of India's recent directive that required banks to cut off ties with companies dealing in cryptocurrencies, The Economic Times reported.

The RBI had last month barred banks, non-bank lenders, digital wallets and any other entities it regulates from dealing with individuals or companies engaged in cryptocurrencies with immediate effect. 

It had set a July 5 deadline for these institutions to comply. The Union government had earlier said that cryptocurrencies are not legal tender.

According to the report, the traders have argued that since there is no official ban on cryptocurrencies in the country, the regulator was blocking "essential services" by asking banks to step away till the time formal guidelines are introduced.

“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 VCs (virtual currencies) illegal in the country,” one of the petitioners was quoted a saying. 

The case has been listed for further hearing on Thursday.

The latest writ petition is the third known legal challenge against RBI's directive following motions brought by Kali Digital, which runs cyrpto-echange CoinRecoil, and moneytradecoin. 

The RBI's move last month was in sync with greater regulatory scrutiny by central banks of several other countries including the US, Japan, China and South Korea.

“Virtual currencies… raise concerns of consumer protection, market integrity and money laundering, among others,” the RBI said in a statement explaining its decision after its bimonthly monetary policy meeting.

The RBI’s decision had exchanges and traders up in arms as people will not be able to use money in their bank accounts or digital wallets to buy or sell cryptocurrencies such as bitcoin and ethereum.

Since then, Indian cryptocurrency exchanges have been considering moving their operations outside the country. 

Praveen Kumar, CEO at Kuala Lumpur-headquartered cryptocurrecy startup Belfrics, had told TechCircle that if any exchange opens an offshore account and lets users trade in foreign currencies, there should be no legal issues.