At the time, many investors in India were optimistic towards the intent of SEBI to obtain better understanding and knowledge of the global standard on cryptocurrency regulation by closely cooperating with officials in Japan, the largest cryptocurrency exchange market in the world.
But, a case can be made that it is already too late for regulators in India to salvage the local cryptocurrency exchange market.
Bitcoin Exchange Zebpay Calls it Quits
On September 28, Zebpay officially shut down its popular cryptocurrency exchange in India, unable to obtain any banking service from commercial banks and financial institutions in the country following the blanket ban imposed by the central bank.
“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,” the Zebpay team said.
The decision of Zebpay to terminate its service in India is monumental, not merely because of its status as one of the three most widely utilized and trusted Bitcoin trading platforms in the region but its patience in dealing with impractical policies implemented by local financial authorities.
Throughout the past few years, Zebpay, as a leading Bitcoin exchange in India, has proactively established industry standards including Know Your Customer (KYC) and Anti-Money Laundering (AML) systems to ensure that exchanges are able to provide relevant information to governments despite the lack of regulations.
Sandeep Goenka, the co-founder of ZebPay, which has millions of users in its mobile app, stated in February that the company wholeheartedly welcomes the government’s willingness to eliminate the possibility of utilizing exchanges and cryptocurrencies like Bitcoin and Ethereum to launder money by criminal groups and that local trading platforms will implement necessary solutions to assist the government.
Goenka said at the time:
“Every citizen and business in this country should play their role in eliminating financing of illegitimate activities, regardless of whether such financing is done using legal tender, cryptocurrency, gold or any other medium. We welcome this move by the government and want to wholeheartedly support the government in this move. We encourage the government to work with our members, as we are committed to detect, report, and eliminate suspicious transactions in pretty much the same way as other institutions do.”
It requires additional resources, capital, and development work to integrate strict KYC and AML systems to create a seamless process for governments to deal with suspicious transactions from unknown sources. Zebpay, Unocoin, and other leading exchanges in India voluntarily integrated these solutions to establish standards in the local crypto market.
Yet, Zebpay, which has been supportive towards the agenda of the government, was forced to shut down its business as banks rejected exchanges and denied any service to crypto-related businesses.
India Will be Isolated
The attitude of the government of India in its delay in regulating the cryptocurrency market is quite clear; it believes that as soon as it regulates the local market, businesses will come in and the crypto market of India will flourish.
Malta, Switzerland, Busan, Seoul, Japan, and France have focused on establishing friendly regulations for crypto startups to bring in leading exchanges and blockchain projects into their regions. Once local exchanges leave the market of India, it will be difficult for the country to revive its local crypto and blockchain market and it may take years, if the government continues to pursue its approach of pressuing existing companies, for the local industry to recover.