Another Indian Crypto Exchange Shuts Down Blaming Banking Ban

Regulatory uncertainty ushered in by India's central bank appears to have brought about the demise of the cryptocurrency exchange Koinex.

AccessTimeIconJun 27, 2019 at 9:11 a.m. UTC
Updated Sep 13, 2021 at 9:22 a.m. UTC
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Regulatory uncertainty ushered in by India's central bank appears to have brought about the demise of another cryptocurrency exchange in the nation.

In a Medium post published Thursday, the Koinex exchange says it's been forced to shutter its services as a de facto ban on banking relationships for crypto firms – ordered by the Reserve Bank of India (RBI) in April 2018 – has meant that it is economically unfeasible to continue with normal business.

The exchange writes:

"We have consistently been facing denials in payment services from payment gateways, bank account closures and blocking of transactions for trading of digital assets. 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. "

While the RBI banking ban is being challenged in the Supreme Court, a lack of clear direction from the government has meant that the case is currently in limbo until a decision is made.

Last September, India's then-largest crypto exchange by trading volume, Zebpay, was also forced to shut down citing the RBI restrictions.

A government panel has reportedly been meeting to try and decide a path forward for crypto regulation in India with total prohibition being possibly on the table.

Koinex further said that a news report about proposed Indian legislation called the ‘Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill 2019’ has created nervousness among customers and caused trading to further drop off.

The article "has created enough FUD in the Indian crypto trading community to result into a sharp decline in trading volumes and [instill] a clear discomfort for all the law-abiding citizens of this great nation."

As a result of the difficulties, the exchange permanently ceased trading services at 2.00 p.m. local time (08:30 UTC) Thursday, June 27.

Koinex explained:

"A snapshot of the wallet balances at this time will be taken for record, and the effort to disburse [Indian rupee] balances will begin immediately. Since the bank accounts with user funds are still frozen and the capital is held up, we have made arrangements for funds from our own resources, so that we return as much as we possibly can, back to our users and alleviate their position in reference to the funds held up in these frozen accounts."

It also pointed out that this action is voluntary, and is "being undertaken ... only with a view to reduce the hardship that it is causing to so many of the users who reposed faith and supported our business effort while things were not constrained."

The exchange added:

"This is our way of saying ‘thank you’ and bidding adieu."

Closed sign image via Shutterstock

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