Just after Christmas, Indian cryptocurrency exchanges and payment gateways started getting calls and emails from their bankers. It was not to wish them season’s greetings.
The banks were not comfortable servicing cryptocurrency businesses. The exchanges and payment gateways would have to make immediate changes in the way money flowed into their platforms.
Some exchanges were told that they should stop accepting money from customers transferring cash via online modes such as Immediate Payment Services (IMPS), National Electronic Funds Transfer (NEFT), and Real-Time Gross Settlement (RTGS). A few payment gateways were asked to stop processing money intended for cryptocurrency trading. Other payment gateways started levying a 2% service charge on such transactions, making it expensive for their cryptocurrency customers who typically trade in lakhs of rupees.
If this was not done, the tacit message from the banks was that the funds wouldn’t be settled. One company was even warned of account closure if it didn’t comply with the directions.
It’s been just two weeks since, but the impact of the banks’ communications is there for all to see: express transfer features have been disabled on some of the exchanges, additional charges have been applied for payment gateway transactions, and in several cases the only option available is direct bank transfer, which the exchanges have mentioned will take more time than usual to process. “We are working on highest priority to resume INR withdrawals followed by INR deposits very soon,” read a pop-up notification on cryptocurrency exchange Koinex.
The target of the banks clearly was the velocity of barrelling cryptocurrency trades. At one stroke, the easy flow of money between investors and exchanges was stopped when the exchanges and payment gateways started implementing— around 27 December—what the banks were asking them to do.
Cryptocurrencies are virtual currencies which are created and held electronically. They are based on the so-called blockchain technology and are usually decentralized in nature. They are “mined”—a process that adds transaction records to a cryptocurrency public ledger—or bought/traded.
Bitcoin is not the only cryptocurrency with the 1,381 others created after it collectively called altcoins: like ether, litecoin, ripple, dogecoin, and such. The market cap of altcoins has grown 176 times in the last one year to $476 billion, shows data of Bitcoin tracker Coin Dance; the Bitcoin market cap topped $283 billion—a 17X expansion. Together, the market cap of both adds up to $759 billion: about one-third of India’s national income.
As carried in LM