“Despite regulatory and banking problems along our journey, we continued to look for solutions as we did not want India to miss the bus of digital assets… 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.”
These were the dying words of Zebpay, India’s first Bitcoin exchange. Established in 2015 with the mission to bring Bitcoin to India. For years it seemed to be succeeding. Recently, in March of 2018, they celebrated their 3 millionth app download milestone. Zebpay was also expanding by popular demand, adding support for Bitcoin Cash, Ether, Ripple and Litecoin as well.
We are stopping our exchange. At 4 PM today, we will cancel unexecuted orders & credit your coins to your Zebpay wallet. No new orders will be accepted. The Zebpay wallet will work even after the exchange stops.
Read more: https://t.co/W8ygzPIYz1 pic.twitter.com/tPWCnyu7Yu
— zebpay (@zebpay) September 28, 2018
Despite being the leading cryptocurrency exchange of India, Zebpay shut down September 28th, possibly for good. To get into the hows and whys, we have to take a look at the laws dictating Bitcoin in India.
Back in July, the Reserve Bank of India (RBI) banned Indian citizens from trading cryptocurrency on exchanges. Soon after, the Supreme Court upheld the ban and denied interim relief to those affected.3 Multiple appeals and petitions have been filed from Zebpay and other leading Indian crypto companies, but the RBI appears to be standing firm on its decision according to an affidavit the RBI published on September 12.
As it stands now, Indian banks cannot service cryptocurrency exchanges. Indian banks must also work to block the accounts of every holder that deals in Bitcoin. Perhaps worst of all, no crypto companies will be able to receive a loan from Indian banks.
So what’s left? Well, India hasn’t blocked the access to the network so peer-to-peer transfers are still an option. Most Indian exchanges are pivoting to that format instead, but trading has definitely taken a hit. The new regulations have made it so prohibitively difficult to exchange crypto for fiat that Indians just aren’t dealing with it. With no legitimate businesses accepting it India, usage has declined dramatically.
If you don’t live in India, you may think that none of this affects you. But remember, India is the second most populated country in the world, hosting 17% of the world’s population. By sheer numbers alone, this story is worth talking about. Losing that big of a market causes ripples in Bitcoin price worldwide. Indeed, it’s just one of the drawbacks of being a global currency.
India isn’t the only country pushing back against cryptocurrency freedoms either. Iran and Venezuela have already began cracking down on Bitcoin exchanges and miners. Japan and Switzerland too have been playing with the idea of implementing restrictions on Bitcoin. As the dust settles, there’s no doubt that governments around the world are watching India as a potential template for future legislation.
However, the recent exchange ban comes only months after a seemingly pro-crypto announcement out of India. In April, the RBI announced that it was considering issuing its own Central Bank Distributed Currency. The People’s Bank of China and the Bank of England have explored the idea of policing the digital frontier as well.
Now, the Indian government can’t stop cryptocurrency trading. It can only stop legal cryptocurrency trading. Sending Bitcoin back into the underground, especially in a country as big as India, is going to severely tarnish its reputation everywhere. To have Bitcoin once again associated so strongly with black market dealings will be a huge step backwards from legitimacy and global adoption.
Many investors are worried that the RBI’s decision will cause a “brain drain” — a massive emigration of blockchain technicians and entrepreneurs out of India into countries with less restrictive regulations. Still, some Indian crypto companies are trying to weather the storm. In the wake of Zebpay’s collapse, Coindelta has stepped up, offering to pay the withdrawal fees for any new users coming from Zebpay. Coindelta on Twitter had this to say:
Coindelta is here to support Zebpay users during this hard time.
We believe that cryptocurrency and blockchain are everlasting and it must not depart from India so soon.https://t.co/T0Di0AZhy7
— Coindelta (@coindelta_) September 28, 2018
With the loss of India’s largest exchange, other companies are scrambling to pick up lost crypto traders, but the long-term viability of any of these companies is questionable. There are concerns that India will continue tightening its grip on cryptocurrency. Many traders are opting to pull their funds out of Indian-based wallets entirely out of fears that further restrictions could possibly freeze their accounts, though no such legislation is currently being considered.
Today, you can no longer download the Zebpay app from Android or iOS stores. However, if you already have the app, you can still use the wallet function to trade peer to peer. Zebpay hasn’t shown any indication that their wallet function is going away any time soon, or if it intends to restart the exchange function in some capacity in the future. Zebpay very well could transfer to a peer to peer exchange like its competitors or move to a country with looser restrictions. It’s too early to tell whether this is only a temporary setback, or the first domino to fall in a larger global trend.