According to one report by the Indian news publication, The Economic Times (ET), bitcoin exchanges in India may be facing some disruption from the top financial institutions in the country.
Several national banks, which include State Bank of India, HDFC Bank, Axis Bank, Yes Bank and ICICI Bank, have frozen accounts belonging to select digital currency exchanges, over the past month, since December 2017.
Moreover, of the Indian banks which have not imposed a complete suspension on the bank accounts, most of them have limited the amount of money which can be withdrawn within a single day.
Even though Economic Times’ list of affected businesses only includes Zebpay, Unocoin, CoinSecure, and BtcxIndia, some other exchanges have also been publicly experiencing some problems.
A banking representative told ET that “(The) Reserve Bank of India has not issued any directive to us – it is just a cautionary move on our part.” Even financial institutions are demanding cryptocurrency exchanges of collateral on their borrowing while keeping accounts hostage.
One source which is familiar with the matter said:
Since last month, banks have been asking for additional collateral with ratio 1:1.
Most of the Indian exchanges which borrowed capital from financial institutions did so hope to raise an equivalent amount in private investment, something which has not come to fruition yet.
Another thing which is also likely is that the venture capitalists are waiting for the government to clarify the taxation, as well as the regulatory aspects of cryptocurrencies in the country.
According to sources quoted by The Economic Times, an estimated eight bank accounts have been frozen so far, with more to possibly follow.
The banks have also reported exchanges by using their bank accounts for reasons other than what was stated at the time of their creation.
Financial institutions in India are mandated to disclose such suspicious transactions to the Financial Intelligence Unit.
But, it is not just the banking sector in India that has been scrutinizing the exchanges. The direct and indirect tax departments of the country have also begun showing a keen interest in the matter.
In December 2017, the India Income Tax department has conducted audits at some cryptocurrency exchanges throughout the country.
After a few days, it announced that it had sent notices to high net – worth individuals that previously transacted large amounts of cryptocurrency.
According to that same department, the cumulative revenue of the top 10 Indian exchanges is actually in the ballpark of $6 billion.
Zebpay and Koinex, who are responsible for most of the digital currency trading volume of India and are the most popular among new investors, have both released several statements that follow the suspension of some of their bank accounts in the past few weeks.
While Zebpay did not stop procession withdrawals in that time frame, it did have some hiccups with deposits evidenced by a support webpage.
Koinex suspended all fiat transactions, which also included deposits for around a week, before re-enabling the option on 8th of January, 2018.
Because of this increased scrutiny by lawmakers, as well as financial bodies, the past month has been particularly troublesome for Indian exchanges.
As the cryptocurrency market will continue to intrigue the population of the country, as well as gain traction among first – time investors, the situation is likely to worsen.