In what came as a shock and surprise to its 1.5 million customers, Zebpay, a leading Indian cryptocurrency exchange, announced earlier on Friday its intention of shutting down its trading operations.
Shocking Announcement
Zebpay, one of India’s biggest cryptocurrency exchanges, earlier on Friday caused jitters among the Indian cryptocurrency community by announcing its intention of shutting down its trading operations. The company expressed its helplessness in the wake of falling trading volumes after the country’s central bank had banned banks from conducting business with cryptocurrency exchanges. RBI’s (Reserve Bank of India, the country’s central bank) circular issued in April earlier this year took effect from the first week of July.
Zebpay is credited with making Bitcoin popular among the country’s growing cryptocurrency community and was a market leader for two years before competitors like Koinex were launched last year. In December last year, Zebpay was adding around 300,000 users daily. As per the announcement, the wallet on the platform will continue to be functional, and customers can hold or move their coins as per their convenience. The exchange, however, has not ruled out resuming operations if the country’s apex court passes a judgment in favor of the exchanges.
On their blog, Zebpay notes:
The curb on bank accounts has crippled our, and our customers’, ability to transact business meaningfully. At this point, we are unable to find a reasonable way to conduct the cryptocurrency exchange business. As a result, we are stopping our exchange activities.
Crypto Crackdown
The crackdown came after most Indian cryptocurrency exchanges were raided late last year by the tax authorities suspecting the exchanges of wrongdoing (accepting cash and tax evasion). All centralized exchanges, including Zebpay, had to suspend deposits and withdrawals of INR, the Indian fiat currency. Business on all crypto exchanges was impacted as trading volumes plunged drastically.
Zebpay tried to remodel itself as a crypto-to-crypto exchange, but apparently, there is not enough trading volume for it to survive. For crypto-to-crypto trading, customers continue to prefer more prominent overseas exchanges like Binance due to larger trade volumes.
Other peers like Koinex and WazirX have recently launched their P2P (peer-to-peer) platforms to enable the customers to continue trading cryptocurrencies against fiat as a workaround to the RBI ban. Zebpay did not opt for the P2P route.
Regulatory Uncertainty Killing the Sector
Till April this year, all was well for Zebpay and other cryptocurrency exchanges. Cryptocurrency trading was booming with close to 2000 bitcoins being traded on all exchanges put together. RBI, in an unexpected circular sent out in April, advised banks to sever business relations with cryptocurrency exchanges after giving them a buffer period of three months.
The circular came into effect from July 5th. Multiple cases were filed in different courts across the country challenging the notification. The country’s highest court intervened and clubbed all the petitions together, and after numerous hearings, set September 11th as the final date for judgment on the matter. However, due to the backlog of pending cases, the hearing has been getting re-scheduled in the supreme court since it came up on September 11th.
The Indian cryptocurrency community is an anxious lot, especially the traders and investors who entered the markets at its peak during November 2017 – January 2018 and could not exit the market during the three-month buffer period provided by the central bank as their portfolio was down (in some cases by 80-90%). Their only hope now is a favorable decision by the country’s apex court as they wait for the judgment day with bated breath.
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