Mumbai, March 29: Cryptocurrency trade in the country has taken a severe beating in the last two months as regulatory concerns have prompted investors to stay away from investing in a host of virtual currencies.
Especially, the impact of budgetary announcement on cryptocurrencies has been devastating with some trading exchanges witnessing a massive 90% drop in trading volume.
In this year’s Union Budget, the Finance Minister has announced that cryptocurrency was not a legal tender. "The government does not consider cryptocurrencies as legal tender or coin and will take all measures to eliminate the use of these crypto assets in financing illegitimate activities or as part of the payment system," Arun Jaitley had said in his budget speech.
This has forced investors to stay away from these virtual currencies on the fears of a regulatory backlash. According to reports, trading in Delhi-based virtual currency exchange, Coinsecure has dipped by around 90% in the last two months. Similarly, some of the exchanges have halted operations due to the uncertainty surrounding the entire cryptocurrency ecosystem.
“The government’s stand on virtual currencies has effectively killed the trading volume in cryptocurrency exchanges. Apart from this factor, suspension of trading account of virtual currency exchanges by major banks has also adversely affected sentiments,” a banking source said.
Notably, most large banks including SBI, ICICI Bank, HDFC Bank have suspended trading account of bitcoin exchanges. Even some banks have restricted the use of credit and debit cards in purchase of cryptocurrencies.
These steps have resulted in creating hurdles in conducting business in the bitcoin exchanges. Due to suspension of exchange accounts, it has been difficult for the bourses to return money to clients post any transaction.
Not only that, transaction in bitcoin exchanges has also dipped due to the raids conducted by authorities towards the end of 2017 to know the identities of customers with high value transactions.
As the opacity of the virtual currency network makes its susceptible for illegal uses, the government’s move has panicked many investors, who preferred to stay away from these kinds of investments.
Moreover, analysts are of the opinion that high volatility in bitcoin pricing has made investors nervous and has prompted personal finance advisors to recommend a no investment zone to their clients. “As nobody regulates the product, investment in bitcoin becomes risky,” Melvin Joseph, Founder of Mumbai-based advisory firm, Finvin Financial Planners said.