Indian Banks Freeze Major Cryptocurrency Exchange Accounts

  • 25 January 2018
  • Cas Proffitt

Several banks around the world have gained a reputation for not being cryptocurrency friendly. A few have even closed accounts or frozen user funds. Bank of America, Santander, and Barclays have been reported to close accounts or generate friction when cryptocurrency is purchased using funds from the account.

The latest in this installment of banks clamping down on crypto users comes from India, where several major cryptocurrency exchanges had their bank accounts suspended, some indefinitely. While the exchanges remain hopeful that they can continue to operate in the meantime, having a substantial portion of their funds frozen presents its own issues.

According to DowBit,

State Bank of India, Axis Bank, HDFC Bank, ICICI Bank, and Yes Bank cited suspicious payments in their decisions. The move comes after tax authorities sent notices to cryptocurrency investors warning that they must pay capital gains on their income from the virtual currency.

The affected exchanges include Unocoin, Coinsecure, and BTCxIndia. The repercussions of frozen bank accounts include loss of fiat liquidity, inability to provide customers with compliant liquidity for their crypto funds, and ultimately a shut down of operations, provided that a workaround cannot be established.

Though some of the accounts have not been permanently frozen, Economic Times reports that some accounts have had their withdrawal limits capped and:

<. . .> banks have been asking for additional collateral with 1:1 ratio,

Recently, Koinex published a blog post stating:

In the past few days, many of our users have faced difficulties with INR withdrawals on Koinex. In these circumstances, temporarily suspended INR withdrawals, until the differences between the payment service provider and their bank are resolved.

Despite the drastic increase in acceptance of the emerging technologies, consumers and businesses are being plagued with substantial resistance to their participation in the ecosystem. Banks are responsible for the responsible management of account holder funds, but it is becoming more common that funds are frozen due to fraudulent spending on legitimate purchases simply because the funds are moving toward cryptocurrencies.

How much liquidity do these exchanges offer?

Economic Times states that financial investigators believe the value of the top 10 exchanges in India to be worth Rs 40,000 crore, or 40,000 * 10 million rupees. Several of the top 10 India-based exchanges are being investigated at this time.

Do these banks intend to invest in cryptocurrency?

The banks have established a stance which leans toward the conservative. They are waiting until the taxation details surrounding crypto become more clear. Despite the rapid growth of bitcoin in terms of value, the banks remain skeptical, even going so far as to refuse to invest in exchanges which have a reasonable expectation of growth and profit.

Once the regulatory issues have been ironed out, however, the banks seem interested in breaking into the new and innovative space. The exchanges and their customers will continue to suffer in the meantime, however.

Would you keep a bank account if it were feasible to operate on 100% crypto, all the time? Let us know in the comment below!

About Cas Proffitt

Cas is a B2B Content Marketer and Brand Consultant who specializes in disruptive technology. She covers topics like artificial intelligence, augmented and virtual reality, blockchain, and big data, to name a few. Cas is also co-owner of an esports organization and spends much of her time teaching gamers how to make a living doing what they love while bringing positivity to the gaming community.

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