Major Indian state run and private banks including State Bank of India, Axis Bank, ICICI Bank, HDFC and Yes Bank have suspended accounts of major Bitcoin exchanges operating out of India. The banks suspect that the accounts are being used for suspicious transactions, according to sources briefed on the matter.
On top of the suspensions, the banks have also demanded additional collateral from the management of these exchanges and have also went on to cap cash withdrawals from the accounts of these exchanges which are still in working order.
People aware of the matter have also said that the banks are closely scrutinizing current accounts held by these exchanges. All the major exchanges are affected including Zebpay, Unocoin, CoinSecure and BTCXIndia among others.
According to an executive from an exchange who did not wish to be named, the banks have not contacted these exchanges regarding the above actions. Other exchanges as well as the banks did not comment on the same.
Although cryptocurrencies are not banned in India, they are highly unregulated. According to India’s tax office, the revenue of all these exchanges combined together could exceed ₹40,000 crore. The tax office also thinks that these exchanges only show the total volume on both buying and selling as their revenue and are hiding individual transactions, which they sometimes do among themselves. They also say that many of these exchanges are operating at margins of over 20% due to the volatility of the market as well as the premium they are charging their customers to provide them crypto services.
The source also said that the banks reaction is cautionary and the Reserve Bank has not issued any directive to them. The banks claim they have asked these exchanges to explain them the business these exchanges are involved in and to clearly specify each and every point. The banks are also flagging some accounts and reporting to the concerned authorities about the same.
Since the block, many exchanges have been facing cash flow issues. They are seeking to meet the government in order to get clarifications on taxes as well as other teething troubles in order to ensure smooth operation.
It remains to be seen what the Indian government decides with respect to cryptocurrencies in 2018.