The move by the Reserve Bank of India (RBI) to ban banks from offering their services to cryptocurrency-related businesses has claimed another victim – Koinex crypto exchange.
‘Sad day for India’s crypto sector’
In a blog post, the co-founder and CEO of Koinex, Rahul Raj, announced that the exchange’s last day of business would be Thursday, June 27, just two months shy of the exchange celebrating its second-year anniversary. Raj described the development as a ‘sad day for all digital assets and blockchain enthusiasts in India’.
But while the hostile environment contributed significantly to the closure of the crypto exchange, Raj stated that a recent proposal to impose a 10-year jail sentence on anyone buying and selling cryptocurrencies had effectively signed Koinex’s death warrant:
…a proposed piece of legislation called the ‘Banning of Cryptocurrencies and Regulation of Official Digital Currencies Bill 2019’ has created enough FUD in the Indian crypto trading community to result into a sharp decline in trading volumes and instil a clear discomfort for all the law-abiding citizens…
Frozen funds to be released
Customers of the cryptocurrency exchange now have until July 15 to withdraw their funds. Users whose funds were frozen after the RBI issued a circular last year in April prohibiting financial institutions falling under its regulatory orbit from having any dealings with firms and individuals engaging in crypto-related activity will also be refunded using Koinex’s own resources in the next five weeks. A convenience fee ranging between 10 and 2000 rupees will be levied on the funds, however.
The anti-crypto stance taken by India will come at a great cost to the world’s second-largest country by population. While Koinex has indicated that it will remain committed to ‘enabling financial sovereignty and deepen financial inclusion’ without necessarily using cryptocurrencies, it is likely to take the expertise, intellectual property and other resources acquired in the cryptocurrency and blockchain field to places where they are valued.
This is already the case with other exchanges which have met the same fate in India such as Zebpay. One direct and immediate consequence will be the loss of jobs as operations move abroad. Just four months after launch, Koinex had reached trading volumes of approximately $265 million demonstrating enormous potential for expansion and consequently the creation of more jobs and a bigger contribution to the Indian economy in terms of taxes.
India shooting itself in the foot with harsh crypto stance?
In last year’s second half, India’s oldest crypto exchange Zebpay shut down operations and moved its headquarters to Singapore and registered an office in Malta. The exchange now allows trading from 22 countries with the most recent addition being Australia.
The development is also likely to deter would-be tech investors especially in the blockchain and crypto niche who will be dissuaded by the hostile environment. This is already being felt. According to the Economic Times, India’s share of the world’s population is over 17 percent but with regards to venture capital investments in the blockchain industry, it has totaled $5.3 million to date against $2 billion globally. This is about 0.265 percent of the world’s total.
Additionally, it will lead to some blockchain and cryptocurrency developers leaving the country in search of opportunities. Last year in September, CCN.com reported that the hostile environment had led to the exit of blockchain talent similar to the brain drain recorded in the country’s tech sector in the years preceding the bursting of the dot com bubble. The blockchain talent from India is reportedly heading to friendlier jurisdictions such as Estonia and Switzerland.
Last modified: March 4, 2021 2:37 PM