Though India is still straddling the fence when it comes to taking a stand on cryptocurrencies - the finance ministry is no fan but the RBI has not banned digital currencies like Bitcoin yet - retail investors in the country are already in a soup.
According to a report in The Hindu BusinessLine, many investors are currently neither able to trade on several bitcoin exchanges in India nor use their linked bank accounts to withdraw/deposit money earned from trading. Given that a recent survey by the income tax department revealed 6 lakh active cryptocurrency traders in the country-unofficial figures put this at several times more-in nine cryptocurrency exchanges trading up to Rs 17,800 crore, we are looking at a major problem. With banks and the bitcoin exchanges passing the buck to each other in response, investors don't know where to go for grievance redressal.
For instance, Varanasi-based Vandana Tiwari told the daily that when she recently tried to invest about Rs 20,000 on a leading bitcoin exchange from her bank account, through the NEFT transaction went through, the amount did not reflect on her bitcoin account. "I had written to the exchange but they said that they have not received the money while my bank statement shows that the money was credited. Now, I don't know whom to approach. Banks are also not giving any clarification," she added. She is not alone. On one hand, other investors report that they are being asked to verify bank accounts when they try to withdraw bitcoin investments, and on the other hand Belfrics India, an arm of Singapore-based exchange Belfrics, has admitted that the platform stopped taking fresh deposits and is awaiting further clarity from regulators.
Ajeet Khurana, recently named as the Head of the Blockchain and Cryptocurrency Committee of India (BACC), has issued a statement saying that "The recent knee-jerk actions by few banks in terms of closing bank accounts of some cryptocurrency exchanges has led to hardship to these citizens. It also created obstacles for exchanges in being able to carry out business. In the past, RBI has issued warnings and consumer education statements about cryptocurrencies. BACC welcomes RBI's actions and regard them as measured and well-thought out. It is our understanding that RBI has not asked banks to close accounts of any cryptocurrency exchanges. We invite banks to follow in the footsteps of RBI, understand this emerging sector, recognize the harmful effects of their knee-jerk reactions, and only then decide their course of action."
While the RBI is still mostly mum on the topic, there is enough evidence of a crackdown in progress. Last week came news reports that the Registrar of Companies is no longer registering digital currency exchanges. This followed the income tax department's "surveys" of the leading Bitcoin exchanges in the country last month. The tax sleuths were basically looking for evidence to establish the identity of investors and traders as well as transactions undertaken to analyse the taxability of cryptocurrencies. Reports quoting the survey claimed that a 25-year-old, who had invested Rs 25 lakh in bitcoins, had seen valuation multiplying to Rs 760 crore. No wonder the taxman wants a slice of the pie while it lasts.