According to a report by the Indian news publication, The Economic Times(ET), bitcoin exchanges in India may be facing some disruption from the country’s top financial institutions. Over the past month since December 2017, several national banks, including State Bank of India, HDFC Bank, Axis Bank, Yes Bank and ICICI Bank, have frozen accounts belonging to select digital currency exchanges.
The suspension of bank accounts appears to be primarily motivated by the banking industry’s lack of faith in such businesses, especially since most exchanges have been largely operating on borrowed funds. Furthermore, of the Indian banks that haven’t imposed a complete suspension on the bank accounts, most have limited the amount of money that can be withdrawn within a single day.
Although Economic Times’ list of affected businesses only includes Zebpay, Unocoin, CoinSecure and BtcxIndia, other exchanges have also been publicly experiencing some problems.
A banking representative told ET that “(The) Reserve Bank of India has not issued any directive to us – it’s a cautionary move on our part.” Financial institutions are also demanding cryptocurrency exchanges for collateral on their borrowings while keeping accounts hostage. A source familiar with the matter said,
“Since last month, banks have been asking for additional collateral with 1:1 ratio.”
Most Indian exchanges that borrowed capital from financial institutions did so in the hopes of raising an equivalent amount in private equity investment, something that has not come into fruition yet. It is likely that venture capitalists are waiting for the government to clarify the taxation and regulatory aspects of cryptocurrencies in the country.