Indian Banks Close Crypto Exchange Accounts And Send 500,000 Tax Notices

  • Indian Government and banks create a hostile environment for crypto market
  • 500,000 high net worth crypto-asset traders have been sent tax notices by Indian tax authorities 

Bitcoin trading companies in India are under pressure as banks and regulators are creating a hostile environment which is negatively reflecting on Bitcoin trade volumes. As reported in Economic Times, Bitcoin trading has plunged 90% over the past two months.

Recently, Indian banks have closed down accounts of major cryptocurrency trading platforms. The Central Bank of India has been warning the public on the risks of trading crypto-assets, however, it has not resorted to any severe actions like blocking customer bank accounts.

Hostile Environment For Crypto Market

The Central Bank of India, RBI has not closed bank accounts of cryptocurrency exchanges, major private banks have chosen not to serve crypto exchanges as clients. Forcing many crypto exchanges to resort to using smaller banks that are happy to serve them.

The country’s largest public sector bank - State Bank of India - and a few private sector banks like HDFC Bank, Kotak Mahindra Bank, ICICI Bank and Citibank have either frozen trading accounts or provided limited functionality.

These banks have also notified and restricted customers from purchasing cryptocurrencies using their credit cards. 

Mohit Kalra, CEO of Indian bitcoin exchange Coinsecure, said:

“There is over a 90% drop in the volume of trade across all Indian exchanges. Our volumes are down from around 300-400 bitcoins a day (in December) to about 30-40 bitcoins a day now.”

Coinsecure

 Indian Banks Disrupt Business

The decisions of private banks to stop facilitating crypto clients has been seen as dictatorial. Ajeet Khurana, Head of Blockchain and Cryptocurrency Committee of India (BACC) said,

“Without any clear mandate either from the RBI or other regulators, asking us to close down our (exchange) accounts while refusing to give in writing what the reason is just disruptive to our business.”

Ajeet Khurana

Meanwhile, crypto exchanges BTCXIndia  and ETHEXIndia have both halted their operations till a clear picture is available from all participants in the crypto market, including banks and regulators.

Over the past few months, Bitcoin has retreated by about 55% from it's all time high of $20,000. 

FUD For Indian Crypto Traders

The Indian government has been constantly warning its citizens to avoid investment in digital currencies. Arun Jaitley, Finance minister of India has repeatedly said that virtual currencies like bitcoin and others are not a legal tender in India and thus to tread cautiously while dealing in cryptocurrencies. As the country lacks any concrete cryptocurrency regulations, the government is taking stern decisions by merely issuing a warning against cryptocurrency investment.

In December 2017, authorities from the country’s Income Tax department conducted an on-site inspection of 9 bitcoin companies looking into the transactions of their customers. Ensuing the raid, in January, the Income Tax Department sent over 500,000 notices to High Networth Individuals that trade in cryptocurrencies.

At present, Indian traders are fearful of investing in crypto markets due to the highly uncertain regulatory stance from Indian’s government.