Indians trade over Rs 22K Cr worth cryptocurrency, banks suspend accounts of major exchanges

Indian cryptocurrency traders have spent over Rs 22,000 crore ($3.5 Bn) within a 17- month period. High net-worth individuals (HNI’s) from sectors such as real estate, jewelry, and young tech-savvy investors have been trading cryptocurrencies through several platforms including Zebpay and UnoCoin.

For uninitiated, cryptocurrencies including bitcoin are the digital currency that can be used to buy products and services without the involvement of the intermediary. Last year, bitcoin price had increased by over a thousand per cent.

Meanwhile, cracking on cryptocurrency investors in the country, the Income Tax (IT) department had sent notices to about 5 lakh HNI’s who were engaged in trading Bitcoin in December last year. According to a report by Economic Times, some accounts of Bitcoin exchanges in the country have been suspended by banks including State Bank of India, Axis Bank, HDFC Bank, ICICI and Yes Bank.

Banks want these exchanges to deposit additional collateral on their borrowings. They also have put a limit on cash withdrawals on operational accounts.

The notice asked about capital gains made by cryptocurrency or bitcoin traders on a yearly basis with detail statement. Following this, Bitcoin or other cryptocurrency holders have to furnish details about the source of investment, and wallet’s public key in which they are stored.

Traders are being asked to provide whether returns have been filed on the gain from the sale of cryptocurrencies as income or not. It also asks to attach details pertaining to the advance tax filed for the gains made in the current year.

Prior to that, taxman also had conducted the survey across 9 Bitcoin exchanges and reportedly gathered evidence for establishing the identity of investors and traders, related parties, transactions details and accounts involved in trading virtual currencies.

IT officials also did cryptocurrencies trading to understand the loopholes and technicalities exist while dealing with virtual currencies including Bitcoin, Ripple, Ethereum, LiteCoin among others.

Despite its growth, central banks of many countries like China and Russia have warned against making investments in it. Sounding alarm on the phenomenon of cryptocurrencies, the Indian government had compared virtual currency like Bitcoin with notorious Ponzi schemes.

Cryptocurrency dealer Pluto Exchange launched country’s first app-based wallet that enables bitcoin transactions using a mobile number in December 2017.

Transaction figure was first reported by Reuters.