Crypto investors take to Twitter over problems in cash withdrawals

A number of  cryptocurrency investors have taken to social media in recent days saying they are facing challenges in withdrawing cash after some exchanges temporarily suspended currency withdrawals. Moneycontrol has seen at least half a dozen of such complaints.

For example, a Twitter user by the name of Midhun Mohan, on July 10 posted a plaint on Indian cryptocurrency exchange Bitbns’ Twitter account, claiming that his INR or cash withdrawal request made on the company’s application has been pending for a month.

“My withdrawal has been pending for more than a month now. I really doubt will I ever get it. If there will be any delay, you should have informed this before itself. We would have looked for other mediums such as P2P (peer-to-peer). I'm worried about my investments now,” Mohan said.

Bitbns, however, says that the delay in deposit withdrawals is only temporary.

“INR withdrawals on Bitbns platform are being delayed owing to temporary issues at the end of concerned authorities. However, requests for withdrawals in INR can still be placed. While our team is closely working to resolve the delay at the earliest, the other trading functions are functioning as per schedule without any hiccups,” a Bitbns spokesperson said in response to a detailed list of questionnaire mailed by Moneycontrol.

“We would like to state that the withdrawals have not been suspended but are only delayed and the same is likely to be addressed shortly,” they added.

Questions on how many withdrawals have currently been “delayed” were not answered by BitBns. This story will be updated with the same if the company responds.

A different Twitter user, sharing his transactions details, said despite applying at BitBns wallet for withdrawal of cash since June 20, he has still not been able to the withdraw the money. “I understand your point of view but please try to expedite transfers at the earliest,” the user said.

“When this will get resolved, all our hard earnings has been blocked..,” wrote another user named Lakshmi tagging Bitbns’ Twitter handle.

Unilaterally imposed moratorium can prove to be fatal for retail investors who took bigger exposures despite underlying risks, experts said. If a moratorium is imposed on a regulated bank, for example, an amount of 200,000 rupees is kept as safeguard by the Reserve Bank of India (RBI).

BitBns is not the only cryptocurrency platform where users are witnessing problems.

Indian founders Darshan Bathija and Sanju Kurian led crypto platform Vauld  had on July 4 informed that it will suspend all withdrawals, trading and deposits on its platform with immediate effect. The exchange, after filing for bankruptcy, is now in talks for a buyout by a foreign crypto lender Nexo, reports said.

Vauld saw customer withdrawals in excess of $197.7 million since June 12, 2022 as cryptocurrency prices corrected sharply, following the collapse of Terraform Lab’s UST stablecoin, Celsius network pausing withdrawals and Three Arrows Capital defaulting on loans. A broader fall in crypto prices only exacerbated Vauld’s problems.

A senior executive at a domestic cryptocurrency exchange told Moneycontrol on July 18 that no matter what reason a company in financial services cites for moratorium, a moratorium in itself is a “red flag”.

As per the source, Bitbns is presently facing issues as the payment aggregator it uses to facilitate transactions must have come under scrutiny for enabling crypto transactions.

“These information sharing discussions (with authorities) primarily seem to relate to KYC (know-your-customer) and PMLA issues (Prevention of Money Laundering),”says Shreya Suri, Partner at IndusLaw. “This could be one of the reasons for a temporary moratorium on cash withdrawals,” she said.

As per Suri, when retail crypto investors face issues like these, the aspect of regulating the asset becomes important.

“The solution, for now, would simply be to wait out the process between the regulator and the platform to reach its conclusion,” she said.

Tougher times ahead

The problems of Indian crypto users and exchanges are unlikely to wane anytime soon as Finance Minister Nirmala Sitharaman reiterated on July 18 that the RBI is in favour of banning the virtual asset, Moneycontrol reported.

"In view of the concerns expressed by the RBI on the destabilising effect of cryptocurrencies on the monetary and fiscal stability of a country, the RBI has recommended for framing of legislation on this sector. The RBI is of the view that cryptocurrencies should be prohibited," the finance minister said in a written response to a question in the Lok Sabha.

"…Therefore any legislation for regulation or for banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards," she said.

The Centre has not tabled any bill to regulate or ban cryptocurrency in the ongoing Winter Session of Parliament. Due to confusion, the cryptocurrency market regulation is open to interpretation in India, industry members said.

While Sitharaman’s comments in Parliament today give a sense of what the RBI wants from the government, it does not mark any significant change from the Centre’s earlier stand, they add.

Crypto assets cannot be considered legal in India as they are not regulated by any authority, but the virtual asset attracts taxes of up to 30 per cent, and 1 per cent tax deducted at source (TDS) for transactions. Moneycontrol on July 5 reported that Indian cryptocurrency exchanges were witnessing investors moving to overseas exchanges after the implementation of 1 per cent TDS from July 1.

Data sourced from AppTweak and compiled by Moneycontrol shows that in January, Indian domestic crypto exchanges including CoinDCX, Coinswitch, Zebpay and WazirX saw over 5.5 million application downloads while international exchanges including the likes of Kucoin, Binance and FTX had over 525,000 downloads. In June, however, international exchanges reported upwards of 451,000 downloads while Indian exchanges reported a little over 756,000 app downloads, sharply lower as compared to January. Since the additional 1 percent TDS kicked in from July 1, it remains to be seen whether the trend continues.

“Honestly, only God knows where crypto transactions are headed. From April onwards, the sentiment was down but right now we are witnessing an 80 percent decline (in transaction value),” said a senior executive at a large domestic cryptocurrency exchange, requesting anonymity.

Advantage bystanders

The source cited earlier said that in wake of a broader fall in domestic cryptocurrency exchange transaction volumes, global crypto players like FTX, OKX exchanges are eyeing an opportunity to enter the Indian markets by buying out stressed domestic crypto exchange firms.

The lack of regulations in the cryptocurrency space, however, is also helping another set of bystanders: Hackers.

Some small crypto users, who are desperate to receive their savings back into account, are using methods including reaching out to anonymous recovery agents on the internet for help.

The identity of these recovery agents remains unknown. As per experts, these recovery cells can be built of highly skilled ethical hackers that use sophisticated technology for recovering money or are simply fraudsters looking to defraud gullible investors.

“Any unverified service for recoveries in cryptocurrencies should be avoided at all costs. Not only is there a high risk of legitimacy of operations, but also with respect to transparency in conduct of the recovery process itself,” Suri said.

“If at all such a service has to be used, one must look out for trusted, reputed organisations which follow the gold-standard for internal compliance and maintains ethical checks and balances for recovery processes. Their tack record for maintaining ethical standards and professionalism during recoveries must also be impeccable,” she added.