The Reserve Bank of India (RBI) ruling to bar banks from dealing in cryptocurrencies has panicked investors, who are now selling their virtual currencies stored in Bitcoin exchanges and seeking advice from the experts.
The investors, who are clueless about the quantum of tax and fear a crackdown by tax authorities, rush has led to a spike in transaction volumes of around 40 percent, with about 90 per cent of that being on the sell side, on Bitcoin exchanges such as Coinsecure and Zebpay.
There has been some amount of panic selling. We’ve seen a 4x increase in our volumes since yesterday, a Coinsecure spokesperson was quoted as saying in an ET report.
Meanwhile, Entrackr‘s queries to Coinsecure and Zebpay have not received a response till the publication of the report.
This is after the RBI on Thursday 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.
In last two years, Indian cryptocurrency traders have spent over Rs 22,000 crore ($3.5 Bn). High net-worth individuals (HNI’s) from sectors such as real estate, jewellery, and young tech-savvy investors have been trading cryptocurrencies through several platforms.
According to some IT officials, at least 20 percent should be paid as advance tax on cryptocurrency earnings as long-term capital gains tax if the currency was held for more than two years. The short-term capital gains tax of 30 percent will be levied if the currency was held for less than 2 years.
The Indian government, time and again, had warned people to be alert before investing in virtual currency like Bitcoin and compared it with notorious Ponzi schemes. The govt is also purposing a cabinet bill that will provide for a complete prohibition of unregulated deposit taking activity.
Earlier, the tax department had 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, after the RBI’s crackdown, Crypto traders have called for a campaign against it with #RBICantStopMe on different social media especially Twitter and Facebook. They insisted that the will continue to deal in virtual currencies.
However, Industry experts said that RBI’s decision will encourage hawala trading and keep bitcoin trading out of the purview of income tax authorities. Traders may take the early days model of trading in cash but they will continue to deal in cryptocurrency as long as the government doesn’t declare a blanket ban on it.
The RBI decision comes on the heels of the arrest of one of largest bitcoin fraudsters Amit Bhardwaj. Bhardwaj had been on the large and facing scam charges worth $300 million (approx Rs 2,000 crore) attached to his company GainBitcoin.
The central bank, though, said that it will continue to promote the use of blockchain in financial services for strengthening transparency and improving inclusion. It is exploring the creation of its own cryptocurrency. It has also set up a panel to study the desirability and feasibility of introducing a virtual currency, and the group will submit its report by the end of June.