Major Cryptos Crashes as Indian Exchanges Announces Banking Issues
Due to a flash crash experienced by Zebpay, India’s cryptocurrency exchange, Ethereum was the worst hit cryptocurrency as its prices fell by over 16%, from $520 to $459 within a few seconds. Prices of Bitcoin fell by 13.8%, Bitcoin cash by 17.5% and Litecoin by 5% due to the flash crash, but it did not affect the rest of the cryptocurrency market and was restricted to exchanges operating within India.
Zebpay, India’s first crypto exchange platform, informed its users through a document titled “Prohibition of dealing in Virtual Currencies” that it would not be able to allow any withdrawals in the local currency due to no support from any banks operating in the country. The list of crypto exchanges that are finding the conditions in India stifling for working is just growing.
The troubles affecting crypto exchanges in India have gained momentum in 2018 but the real troubles started in the month of December 2017, when the central Government of India issued a notification to all financial institutions regulated by the central policies to not deal in cryptocurrency. The statement from the Government also warned the general public against investing in cryptocurrency and compared it to a Ponzi scheme. The statement read “There is a real and heightened risk of investment bubble of the type seen in Ponzi schemes which can result in sudden and prolonged crash exposing investors, especially retail consumers losing their hard-earned money.” The aim of the notification was to reduce the chances of losses due to Ponzi-like schemes and to caution consumers to maintain caution.
The Reserve Bank of India (RBI) has also issued a public notice prohibiting Indian banks from engaging in any activities related to cryptocurrency in the country. RBI has banned all financial institutions under its purview from dealing in cryptocurrencies. The banks had been given a time frame of 90 days to comply with the order, which ends on 5th July. The above decision from the RBI has been challenged in the Supreme Court of India with the date of hearing fixed for 20th July 2018. The statement from RBI read as “In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling virtual currencies.”
The outcome of the impending deadline has created a panic within the crypto community, and the possibility of rupee withdrawals being stopped had led to investors selling off their investment in cryptocurrency at very low prices.
Now all eyes are on the Supreme Court of India to see what would be the outcome of the hearing as it could be a potentially game changer if the ban is lifted which would open up the market, but if it upholds the ban, it could be disastrous for the crypto community in India.