India continues its shaky experiment with money’s future as its domestic population is wild about cryptocurrency. Its government and regulators are less than thrilled, though. The banking system is siding with minders, causing friction between account holders and crypto exchanges. Everyone is pointing to a lack of clarity in the law as origin for the confusion. Meanwhile, average Indian traders suffer.
Also read: Bitcoin Turns 9 Years Old
Exchanges in India Stuck
Popular crypto exchange in India, Koinex, posted an update titled, The Truth Behind the Unexpected Delay. In an usually emotional explanation, the company understood “many of our users have faced difficulties with INR withdrawals on Koinex.” INR is the abbreviation for its national currency, ₹ Indian rupee.
“A tussle between our payment service partner and their bank has caused an indefinite delay in the settlement of a large portion of deposits to Koinex in the past 2 weeks,” they explained. “This created a bottleneck in the cash flow of user funds, thus hamstringing INR withdrawals on the platform.”
The government of India has at once been demonstrative in its denial of cryptocurrency viability, yet it has been loathe to regulate on the matter, placing its banking industry in at least a momentary financial purgatory. They’re been raids, even. No one seems to know what to do, and in such cases the conservative banking industry in any country usually errs on the side of caution.
The country’s Finance Ministry weighed-in at the end of last year, warning of cryptocurrencies, which it refers to as virtual currency (VC), ”Consumers need to be alert and extremely cautious as to avoid getting trapped in such Ponzi schemes,” and of how, “The Government or Reserve Bank of India has not authorized any VCs as a medium of exchange. Further, the Government or any other regulator in India has not given license to any agency for working as an exchange or any other kind of intermediary for any VC.”
Speaking on condition of anonymity to Quartz, another Indian exchange’s CEO said, “The government hasn’t banned virtual currencies, but has expressed its reservation about them. Our understanding, based on various meetings with our banking partners, is that this (situation) is a result of those reservations. Instead of arm-twisting, it would be better if they could come up with steps to regulate the industry.”
“In these circumstances,” Koinex continued, “we were constrained to temporarily suspend INR withdrawals, until the differences between the payment service provider and their bank are resolved. While we have taken firm action, we are also in constant touch with the payment service provider and are providing our complete cooperation to help resolve the matter at the earliest.”
Enthusiasts across the world have seen these scenarios played out, and the better exchanges often give their customers enough notice to plan. Often, customers are left either missing giant price swings in one direction or another, helpless as a result of government regulatory impotence. Australia is a recent example mentioned in these pages.
Koinex assured, “we want to inform you that your money is safe. The affected deposits are safely held with the payment service provider’s bank in a nodal account (nodal account is a custodial account where users’ money is safely deposited). INR withdrawals will resume as soon as the settlement to Koinex is completed. We expect a resolution within this week,” the company claimed.
The next business day, the exchange announced the issue resolved for the moment. No word from other exchanges. No clarification from regulators.
What is your experience with banks and crypto? Let us know in the comments below.
Images: Koinex, Pixabay.