The Supreme Court has decided to hear all matters relating to the RBI directive stopping banks from dealing with virtual currencies.
The top court has directed the transfer of pending petitions, two in Delhi High Court and one in Calcutta High Court, to the Supreme Court.
The next date for hearing is July 20. High courts will no longer entertain any more petition relating to the matter. A total of five writ petitions including two in SC, have been filed challenging the central bank's circular.
"One of the key arguments made out in the petition was that the circular was not preceded by any stakeholder consultation, which is what the latest order gets to," said Anirudh Rastogi, a petitioner and managing partner at TRA, a technology-focused law firm.
The Reserve Bank of India (RBI) on April 6, mandated banks, e-wallets, and payment gateway providers to withdraw support for cryptocurrency exchanges and other businesses dealing with virtual currencies in India. The circular mandates financial institutions to block services to crypto-related businesses by July 5, putting them in a spot.
In the meantime, the Supreme Court has said that the petitioners can make representations to the RBI regarding the circular within two weeks. "This gives an opportunity to the petitioners to make a representation before the RBI," Rastogi said, adding that it will be an opportunity for exchanges to showcase self-regulatory policies such as Know Your Customer (KYC) and Anti-money Laundering (AML) to central bank officials.
The Delhi High Court on May 1, had dismissed a writ petition filed by Paras Lehana, a crypto trader, on grounds that it infringed his right to carry on an occupation. The court disagreed, ruling that the circular came under the Banking Regulation Act and that such policy matters cannot be interfered with by the court.
While the next hearing is on July 20, the RBI directive for banks to stop offering services is July 6. "We are left with a choice to exit or stay," said a Nalin Mishra, a crypto trader. "There is enough time for us to cash out coins to banks and get our money," he said.
Experts say the RBI's move encourages in-cash transactions - offline exchange of cash for transfer of bitcoins - making it hard for the government to track and levy taxes. Websites such as localbitcoin.com allow individuals to exchange local currency for bitcoins.