Accounts belonging to Bitcoin exchanges in India are being frozen or being limited until further notice. Reports are coming from Indian news publications that cryptocurrency exchanges are facing some disruptions from the country’s top financial institutions. A lot of the top National banks, including State Bank of India, HDFC Bank, Axis Bank, ICICI Bank and Yes Bank have all taken action towards limiting or closing accounts of select Bitcoin exchanges.
Why were the accounts of Indian exchanges targeted
The primary motivation behind this is the banking industry’s lack of faith in such businesses, especially since most exchanges are operating on borrowed funds. Furthermore most banks have limited the amount of money that can be withdrawn withing a day. India’s Ministry of Finance called Bitcoin a Ponzi scheme at the end of last year so this news is not surprising.
Financial institutions are also demanding cryptocurrency exchanges for collateral on their borrowings, while keeping accounts hostage. Supposedly the demanded ratio is 1:1. Most Indian exchanges that borrowed money from banks did so in the hopes of raising an equivalent amount in private equity investments, but that has not happened yet.
People and investors are waiting for the upcoming regulations. The government will clarify the taxation and regulatory aspects of cryptocurrencies. The Indian Income Tax Department has also begun showing interest in the subject. They did audit a number of Bitcoin exchanges throughout the country. According to the same department, the total revenue of the top 10 Indian exchanges is around six billion dollars.
It was a troublesome month for the Indian exchanges due to the increasing control by financial institutions and lawmakers. Every exchange has managed with the problem in different ways. Some suspended all fiat transactions for a week, before reverting back the options. The situation is not getting better any time soon, until the government decides what regulations it will impose on the cryptocurrency world.
There were some good news too
There were some good news for cryptocurrencies in India. Andhra Pradesh, an Indian state known for attempting to explore the application of blockchain technology, made a new agreement with a local funding firm. According to a tweet by the government, the state signed a Memorandum of Understanding with the Covalent fund, so they can start a blockchain ecosystem. Also they want to launch a blockchain university with a 10$ million investment. The state hopes to integrate blockchain platforms into businesses by next year.
Government of Andhra Pradesh has signed a MoU with Covalent Fund to start a Blockchain ecosystem in India, under @FintechValley, Vizag. A Blockchain University will soon be set up and an investment of up to $10 million will be done as an initial pilot program. pic.twitter.com/PAf3LAOuS0
— Andhra Pradesh CM (@AndhraPradeshCM) January 19, 2018
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