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10 Jan, 2018 14:56

Indian banks squeeze bitcoin payments and withdrawals

Indian banks squeeze bitcoin payments and withdrawals

Bitcoin users in India have been facing difficulties with deposits and withdrawals after the country’s banks blocked all crypto-trading. The Finance Ministry has compared digital currency investments to “Ponzi schemes.”

Indian cryptocurrency exchange Koinex said in a post that a tussle between its payment service partner and the banks “has caused an indefinite delay in the settlement of a large portion of deposits to Koinex.”

It added: “This created a bottleneck in the cash flow of user funds, thus hamstringing INR (Indian rupee) withdrawals on the platform.”

Another exchange, Coindelta, has had its instant deposit and withdrawals facility suspended. Coindelta's co-founder Shubam Yadav told the Quartz that three other exchanges confirmed facing a similar issue.

Bitcoin’s meteoric rise has been worrying regulators across the globe, including India. The country’s central bank has warned “users, holders, and traders” of the risks related to cryptocurrency.

Last month, the Indian Income Tax Department raided bitcoin exchanges across the country seeking to identify cryptocurrency traders. The raids were conducted because of alleged tax evasion by exchange customers.

India’s finance ministry has warned investors about the risks of trading in cryptocurrencies such as bitcoin, branding the ‘virtual currencies’ as akin to a Ponzi scheme, a notorious investment fraud that involves payment of purported returns to existing investors from funds contributed by new investors.

The ministry also said there had been a “phenomenal” increase in demand for digital currencies. It explained the price of cryptocurrencies as “entirely a matter of mere speculation resulting in spurt and volatility in their prices.”

Demand for bitcoin is outweighing supply in India, pushing its price in the country up to 20 percent higher than international prices. Statistics show that about 30,000 customers are actively trading at any one time.