RBI clampdown: After investors panic, bitcoin exchanges may shut down operations in India

After triggering panic among cryptocurrency investors, now the Reserve Bank of India (RBI) ruling that barred banks from dealing in virtual currency is forcing bitcoin exchanges to think about their future and shift their base from India.

Bitcoin exchanges such as Zebpay, Unocoin, CoinSecure, BuyUcoin and BTCX India feel the heat of sudden disruption in banking services, which are affecting their services of deposits and withdrawals. The exchanges are also taking legal advises and are working on various tax structures to combat this clampdown.

Most of them are exploring to shift base to countries, which supportive to their businesses. Singapore, US, Dubai, Delaware and Belarus are countries where they plan to shift their bases.

Shivam Thakral, CEO, BuyUcoin, a cryptocurrency wallet and exchange to ET said that he is to move his firm to a foreign country where regulations allow opening of bank accounts plus we won't be dealing in fiat currency.

"We are trying different angles (to survive), which we cannot disclose. We want the current ecosystem and (cryptocurrency) industry to survive, without abruptly changing our model, where there is no exit point," Sathvik Vishwanath, founder and CEO of Unocoin was quoted as saying by DNA.

This is not all, the crypto exchanges are also facing troubles from the income-tax department and the indirect tax authorities.

Earlier in December, investigations were launched to ascertain the GST rate applied to them. The tax department had also issued about 500,000 notices to Bitcoin and other cryptocurrency investors. The notices asked about capital gains made by cryptocurrency or bitcoin traders on a yearly basis with detail statement.

Meanwhile, bitcoin transactions volumes spiked following the central bank ruling that triggered panic, to around 40 percent, with about 90 per cent of that being on the sell side, on Bitcoin exchanges.

On Thursday, the RBI had released a statement directing all regulated entities, including banks, e-wallets, and payment gateway providers, to stop dealing with individuals and businesses in the partially banned cryptocurrencies.

“In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs (virtual currencies). Regulated entities which already provide such services shall exit the relationship within a specified time.” the RBI had said.

However, Crypto traders are of the view that this will lead to temporary discouragement for investors.

Entrackr has sent a set of questions to bitcoin exchanges namely Zebpay, Unocoin, Coinsecure and BTCX India asking about their future course of action.

The report will be updated as we receive responses from them.