Sunday, February 5, 2023

Banks Pulls Back Its Support From Crypto Exchanges, Customers Suffer A Loss

For quite a long time now, the Indian cryptocurrency exchanges have been trying their best to attract more users to their platform. At some level, they got successful, but their aim to dominate the market like the stocks and mutual funds is still not fulfilled.

In this recent years, as people started to learn more about cryptocurrency, the industry saw many new users joining the exchanges to invest in Bitcoin and other cryptocurrencies to get a high return. But again a problem arises when the Indian banks started declining the crypto transaction payments from their end. 

While doing so, the banks released ab explanation, stating that currently, the banking authorities in the country have kept the digital assets under their regulatory cloud.

For the past few days, the crypto investors, who have their accounts in ICICI, HDFC and Union Bank of India, are unable to deposit and withdraw the funds from their crypto accounts. 

Neither Bank Nor Crypto Exchanges, But Investors Are Suffering

The cryptocurrency market is volatile in nature, therefore, most traders prefer to make their investment when the market is low, as by doing so, they can get a higher return in the future. 

Before placing their money in cryptocurrencies, the traders track the market for weeks, months, or for years and as soon as the price falls, the traders put their funds in it. 

But recently, when the price of Bitcoin, Ethereum and other cryptocurrencies came down, the Indian investors were not able to invest their money because the banks pulled back their support from the exchanges like WazirX, CoinDCX and CoinSwitch Kuber.

Sudipto Deb, a Mumbai-based engineer, has been trading in cryptos for quite a long time, but for the first time in these years, he was unable to make his investment, properly. 

Deb said, “There is always a problem with the partner bank with all of them (apps). If I know the price is going to rise and I am not able to invest, it is just a waste.”

In the year 2018, while imposing a ban on cryptocurrencies, the Reserve Bank of India (RBI) released a notification, instructing the banks to not get involved in any crypto dealings in the country. However, in the year 2020, the Supreme Court of India revoked that ban, but the cryptos still remained under a regulatory cloud. 

After the recent incident, when the banks suspended the crypto-related transactions of the customers, they took the help of social media to get answers from the cryptocurrency exchanges. Many of the investors took it to Twitter and called the cryptocurrency apps ‘fraud’. They even demanded a refund for the loss they had to suffer because of the issue between banks and the exchanges.

The CEO of CoinSwitch Kuber, Ashish Singhal, did not expect this kind of response from the users. While addressing the complaints, Singhal said, “Even at Amazon we had to handle 100,000 transactions a second. Here we are seeing 500,000 to a million concurrent users. We have grown so fast, all our projections have been proven wrong.”

Crypto Exchanges Trying Hard To Resolve Issue 

As per the sources, recently, the exchanges held an online meeting with banks and the RBI, individually and collectively, with the hopes of resolving the issue as soon as possible.

Nischal Shetty, the co-founder of WazirX has recently stated that although they held a meeting with the banks, still they are not convinced fully. Shetty further specified that the exchanges even tried to make banks understand that the RBI’s decision has been revoked by the SC, but still they haven’t received any certain response from them (the banks).

The banks told the exchanges that they are not governed by the Supreme Court of India but by the RBI. And presently, RBI has not clarified its stance over the issue, therefore, the banks decided to suspend the transaction.

One of the banks’ sources has told that they could revoke the suspension if the exchange provides them the new information about their legality or they get approval from the RBI. 

Meanwhile, some of the banks are carefully offering their support to the exchanges. On the other hand, the exchanges, themselves are trying new schemes to provide hassle-free services to the users.

Currently, the main focus of the exchanges are the new customers that have recently arrived on the platform. The exchanges believe that the old users, who are also facing the problem, would not leave their platform, as they have been convinced that it is a temporary issue.

Crypto Investors Opting For Foreign Exchanges

However, some Indian investors still choose foreign crypto exchanges over Indian crypto exchanges. 

One of the crypto investors named Dhawal Chopda has recently told that he prefers foreign exchanges for investment because any time the Indian regulators could clamp down the exchanges. He further stated that the Indian crypto community requires regulatory support so that it could not miss the new opportunities.

Summing Up

In the coming weeks, the banks might again lend their support to the exchanges, but the investors would still facing the same problem. There is a huge possibility that they would have to wait a long for processing their investment.

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