Besides preventing citizens and residents of India from participating in the crypto markets going forward, the proposed crypto ban by the Indian government could also negatively impact investors who have already put their money in digital assets.
According to the Times of India, more than $100 million invested by Indians in Initial Coin Offerings (ICOs) since 2016 could be frozen in limbo if the proposed ban becomes law. Per the publication, Indians invested approximately $111 million between 2016 and the first quarter of this year in ICOs and Initial Exchange Offerings (IEOs). Some industry estimates place the figure even higher, at about half a billion dollars.
Crypto investors in India are already experiencing difficulties cashing out of their crypto holdings. This is because the Reserve Bank of India has already prohibited all the financial institutions under its regulatory ambit from offering their services to crypto-related businesses such as exchanges.
Sources who spoke to the Times of India speculated that some crypto investors might be left with no choice but to give away their crypto holdings to those in more crypto-friendly jurisdictions:
We cannot do a transfer to others in India, and looks like we can only gift holdings to those in other pro-crypto countries.
The difficulties experienced by Indian crypto investors in cashing out was aptly demonstrated this month following the closure of the Koinex exchange. Initially, after announcing it was shutting down, Koinex set July 15 as the withdrawal deadline. However, this has been extended twice with the final withdrawal deadline now set for July 31.
Besides investors in cryptocurrencies who will be rendered unable to cash out, venture capitalists and private equity funds that put their money in crypto startups may also have to write off their investments in the startups that might not survive a ban.
Per startup tracking firm Tracxn, India had 332 blockchain startups as of February this year. A list of the top ten selected by Tracxn showed that combined they have received funding worth approximately $24 million since 2011.
Among cryptocurrency businesses, exchanges have arguably been the hardest hit with some of them shutting down completely while others moved abroad to pursue other markets. Some of the exchanges that have shut down completely include Cryptokart, transforming one of its co-founders, Gaurang Poddar, from a job creator to a job seeker:
We’ve decided to shutdown Cryptokart … If you know anyone interested in launching their own exchange, please let me know. Also, I’m looking for opportunities in product management. If you know of any, please connect me.