Major Indian Bitcoin Exchange Zebpay Shuts Down Due to Banking Freeze

Zebpay, the largest crypto exchange in India in terms of volume, has announced it will be closing its exchange services later today (September 28th). The announcement was made on twitter a few hours ago:

Zebpay was responsible for playing a pioneering role as the major cryptocurrency exchange in India, as many Indians took their first steps in the cryptoworld using the platform. In a blog post, Zebpay team explained the reason behind the halting of exchange services:

The curb on bank accounts has crippled our, and our customer’s, ability to transact business meaningfully. At this point, we are unable to find a reasonable way to conduct the cryptocurrency exchange business.

It seems that national policies were the central cause behind the closure of the Zebpay exchange.

India’s central bank, the Reserve Bank of India (RBI), had issued a ban on cryptocurrencies in April, prohibiting any regulated financial institution or bank to offer services related to the cryptocurrency industry. Although cryptocurrencies exchanges tried to reverse the situation by filling a petition, India’s supreme court reported in July that the ban would remain active until a final hearing that has yet to happen.

Since the ban, trading volume on Zebpay had been steadily falling. In July, the company announced it would pause Indian rupee deposits and withdrawals, making the 24-hour trading volume to plummet from $5 million to just over $200,000. Although the company will close down its exchange, all tokens will be credited to users’ wallets and the wallet service will remain active, with the exclusion of the trading features.

Zebpay and Crypto in India

Founded in late 2012, Zebpay started trading using its wallet app, and quickly became one of the most-downloaded apps in India, boasting 3 million users and supporting 20 cryptocurrencies and 22 trading pairs at the time of this writing.

 

Kraken Raises $13 Million from Over 2,000 Investors to Expand Business

San Francisco-based digital asset exchange Kraken has reportedly completed a $13.5 million investment round through an internet-based fundraising platform, called Bnk To The Future (BF).

Notably, Kraken’s latest crowdfunding campaign is the largest investment round BF has managed. The regulated crypto futures and spot trading platform received investments from 2,263 different investors.

Kraken Seeking $4 Billion Valuation After Fundraiser

According to Coindesk, the American exchange operator had been seeking additional capital in order to increase its present valuation (as a company) past the $4 billion mark. The funds raised will also be used to make new acquisitions and also directed towards financing other initiatives that are aimed at further expanding Kraken’s business operations.

Kraken’s management has already made a few key acquisitions including a $100 million acquisition of UK-based Crypto Facilities (in February 2019), an established futures and derivatives trading platform. The US-based exchange has also acquired CryptoWatch, a financial data and trading platform.

$85 Billion In Crypto Trades Settled In 2018

As one of the leading crypto exchanges, Kraken settled trades worth a total of $85 billion in 2018. The exchange’s trading volume reportedly came from over four million traders located in 200 different countries.

In order to help Kraken further expand its line of products and services, BF has established a “Special Purpose Vehicle” (SPV) - which will allow the exchange company to receive equity from over 2,200 investors. Referred to as illiquid investments, the equity-based transactions will be facilitated through the SPV in an indirect manner.

Bypassing Current Regulatory Requirements

Acting as a single investment manager, the SPV will accumulate funds contributed by all parties interested in holding a stake in Kraken. Notably, Kraken’s decision to raise capital in this manner will allow it to avoid having to register as a public company - which existing U.S. regulations require under the 1934 Securities and Exchange Act.

Although Kraken’s investors will not be shareholders, they will be entitled to a certain return on investment (ROI) if the US-based exchange offers its shares via an initial public offering (IPO). However, the shares must be acquired through a different organization and potentially also through Kraken itself if it decides to opt for a Management Buy-Out.

High-Risk, Speculative Investment

Commenting on the initiative, BF’s management cautioned:

This is a high risk high returns platform – please understand this before investing.

Meanwhile, Kraken added that investors would be able to reduce risk as they would be acquiring a preferred share class with the ability to liquidate their funds. However, the American exchange did acknowledge it was a speculative investment.

An email sent to the initiative’s investors suggests that staking funds in Kraken’s business would have the following advantages:

CryptoWatch Premium membership, the ability to leverage shares for margin collateral, priority service from our client support team, invitation to Kraken’s exclusive investor chat room, subscription to Kraken’s Daily Hash newsletter and OTC Daily report, bi-annual Kraken investor update, beta access to new Kraken products and features, limited edition Kraken swag, [and] 5% investment rebate in KFEE.

Will Only Make Money If Kraken Sells for Over $4 Billion

According to an analysis by BF, a $1,000 investment in the company’s project would be worth around 48 future shares from a total of 201,612,210. If Kraken gets valued at $4 billion, then the 48 shares purchased would give the holder only a 0.00002380808% stake.

BF’s analyst further noted:

And that’s about the sum that you invested. But as you are in the “preferred share class” you get your investment back even if Kraken sells only for $112 million. Only if Kraken sells for more than $4 billion we will make money.