India aspires to be a superpower in the 21st century, but it has struggled to get a clear policy implemented when it comes to crypto. The current version of the blanket ban was issued by the Central Bank a year back and there hasn’t been any further development, yet the crypto community held together and innovated. This helped them survive, but now it seems that the ban is taking too much of a toll on the market players. Another crypto exchange, Koinex, has shut down this Thursday citing the RBI ban as the reason.
The RBI ban
On April 6, 2018, the Reserve Bank of India issued a circular instructing all regulated financial services entities to exit relationships with companies and individuals dealing in virtual currencies and block all such crypto-related transactions. This meant that exchanges were not able to carry out money transfers to their client accounts. Immediately after this, the volume of Bitcoin and other crypto being traded domestically dropped sharply. One way around this was peer to peer exchanges, but the problem was that exchanges don’t get any fee on such transactions. Declining revenues and regulatory issues have led to unbearable pain for domestic exchanges.
Koinex began digital assets exchange services on August 25, 2017, and they were fully KYC compliant. Within a span of 4 months, Koinex rose to become one of India’s largest digital assets exchanges recording $265M in trading volume and attracting 40K+ new users in 24 hours in the month of December. But those were the good times, everything went downhill once the ban was in full swing. At the time, Koinex had become India’s fastest growing startup and was ultra profitable.
The exchange announced the shutdown through a Medium post. it was a thank you note to everyone who supported the exchange, as well as an explanation to its users why the shutdown was inevitable. The company was facing bank account freezing and refusal of services from payment gateways, and this was not just for the payments related to crypto transaction. In the post the company went on to explain, “Even for non-crypto transactions like payment of salary, rent and purchase of equipment, our team members, service providers, and vendors have had to answer questions from their respective banks — just because of an association with a digital assets exchange operator”. This coupled with the rumor that the Indian government is going to ban crypto altogether had affected their operations severely. The company has however informed its users that all obligations will be met as soon as possible, although not required by law but to reduce the hardship of users who have put faith in the exchange in times of hardship. The company has expressed its regards to its users by saying(through the post), ”This is our way of saying ‘thank you’ and bidding adieu.”
As of now, there is no official confirmation about what the regulation or future legislation will be. This uncertainty is what is making many to stay away from crypto. This kind of policy can hamper the progress of crypto. For a country aspiring to be a superpower, this is a really bad approach. They will never succeed unless they embrace technology and change, whether they like it or not. No country in the modern era has been successful economically by being repressive. It’s the knowledge and value produced by using it that transforms economies. There is another hidden danger in this trend as it could set a precedent for other countries, and if they choose the Indian or Chinese model, the community as a whole is in trouble.
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