Reserve Bank of India has issued a circular to banks to halt virtual account services to operators of cryptocurrency exchanges
Going the China way, Indian authorities could also slowly throttle the cryptocurrency market by strewing regulatory hurdles in its way.
For, according to Shivam Thakral, co-founder and CEO of cryptocurrency exchange BuyUCoin, the Reserve Bank of India (RBI) has already put a deterrent in their way by issuing a circular to banks to halt virtual account services to operators of cryptocurrency exchanges.
This, he said, has forced many private banks like YES Bank, ICICI Bank and others to withdraw facility of virtual account that was being indirectly offered to exchanges through payment gateways.
This has slowed down trading on cryptocurrency exchanges as it takes a longer time to reflect deposits and withdrawals through netbanking of a current bank account services.
A virtual account number is a system-generated unique account number based on logic and masks the original account number issued by banks. It is hard to trace these account numbers to core banking system and remittances to them can be made only through NEFT & RTGS modes as directed by the merchant.
Thakral claimed that with virtual account services withdrawn, his customers were playing with whatever money was left in their wallet. He said they are not able to take out or put money into their wallet.
“Whatever money is there in the wallet, people are using that. No deposit and withdrawal is being processed. Basically, people cannot deposit or withdraw money from exchanges. They are buying and selling with their existing money but they cannot take out or put money,” he said.
Thakral said even as his exchange was running as usual, its services have been affected. According to him, BuyUCoin had a virtual account with YES Bank via payment gateway Cashfree. This account was paused post December 27 last year after receiving an email from Akash Sinha of Cashfree.
“Devesh (Aggrawal – one of the founders of BuyUCoin), as confirmed over call, we would be pausing the AutoCollect services from 3PM today. Will send you a separate mail when we resume it back. Payout Services will also face disruption in a day or two. Will send you a notification 24 hours before we do so. Meanwhile, please reduce the traffic there,” said Sinha’s email, which DNA Money has gone through.
Since then trading on Thakral’s BuyUCoin has slackened. Tying up with a public sector bank Central Bank of India for netbanking services has not improved things much for him.
The founder of BuyUCoin said all exchanges were in the same boat as him and were trying hard to get their business back to normal. Thakral has begun talks with payment gateway service provider PayUMoney and hire more workforce to improve trading efficiency on his exchange.
“We are trying to get back to normal. We have increased our working staff so that we can offer faster service of fund deposits and withdrawals,” he said.
Sattvik Vishwanath, CEO and co-founder of virtual currency exchange Unocoin, said his firm was “not officially aware of this (directive from RBI to banks) news and it has not affected our relationships with our banking partners”.
In a response to a DNA Money query on how exchanges were impacted, he said, “If such directive exists, it could affect the industry and the impacts depends on the steps taken by individual banks”.
Satish Mugulavalli, director – technology at venture capital firm YourNest, said the regulations on cryptocurrency would be framed to protect retail investors and curb money laundering.
“It (RBI) is definitely trying to understand how these things will pan out. Ultimately, over the next six months we will see much clearer regulations. Money laundering and protecting retail investors are the two things that most regulators will focus on,” he said.
Meanwhile, China has come out with restrictive regulations to clamp down on exchanges. It has now turned its attention on bitcoin miners, who consume excessive electricity to mine the virtual currency.
Bitcoin mining involves solving complex mathematical algorithms to earn bitcoins. It also requires miners to verify and record transactions on the blockchain technology network. This helps them earn more bitcoins.
In another part of the world, billionaire investor Warren Buffet predicted an almost certain “bad ending” for cryptocurrencies on Wednesday.
VIRTUAL TROUBLE
- Reserve Bank of India has issued a circular to banks to halt virtual account services to operators of cryptocurrency exchanges
- This has forced many private banks like YES Bank, ICICI Bank and others to withdraw virtual account facility that was being indirectly offered to exchanges through payment gateways
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