Tight regulatory supervision in India is forcing digital currency exchanges to leave the country for foreign shores.
Zebpay, one of India’s largest virtual currency exchanges before it shuttered last month, now has a registered office in Malta. It already has one in Singapore.
Zebpay’s new exchange will be providing services to residents of about 20 countries, but not India, its website says.
Apart from Malta, investors residing in Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Netherlands, Poland, Portugal, Slovenia, and Sweden can transact.
An email sent to Zebpay regarding the Malta exchange remained unanswered.
Zebpay once accounted for half the estimated five million to six million virtual currency investors in India and its sudden decision to exit had sent tremors across the Indian market.
What led to this?
In April, the RBI dealt a death blow to the Indian cryptocurrency ecosystem as it forbade banks from undertaking any business relationship with digital currency bourses and virtual currency traders from July onward.
This has severely restricted trade in cryptocurrencies. At its peak, in November-December, 2017, exchanges were adding up to 300,000 new customers a month. Monthly additions have now plummeted to less than 25,000, according to industry estimates. For small exchanges, the number is even less.
“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,” Zebpay had said in a blog post on Sept. 28. “As a result, we are stopping our exchange activities.”
Since April, the exchanges have tried to engage with the government and the central bank on several occasions but it hasn’t yielded any results so far. Meanwhile, the firms’ legal battle against the RBI’s diktat has reached the country’s top court. But six months on, the hearing is still in progress.
The government has set up a committee with representatives from the finance ministry, the RBI, and India’s market regulator Securities and Exchange Board of India (SEBI), to come up with draft regulations around digital currencies. Even that has been delayed.
Driven against the wall, many digital exchanges here have been contemplating shifting their businesses to more cryptocurrency-friendly locations like Australia, Singapore, Switzerland, Estonia, Malta, Japan, Dubai, and the Cayman Islands.
And Malta had emerged as their preferred choice.
Malta, an island nation south of Italy in the Mediterranean Sea, is a popular location for all things cryptocurrency.
At a time when some of the other Asian countries have turned hostile, Malta provides regulations that are transparent and more favourable towards virtual currencies. The legal certainty and the government’s approach to invite more cryptocurrency companies has turned it into a haven for digital currency exchanges.
Unsurprisingly, Malta already accounts for the highest share in global cryptocurrency trading volume. Binance, the world’s largest crypto exchange, is also looking to enter the island country.
India’s delay in establishing a clear regulatory framework on cryptocurrencies, is clearly a gain for countries like Malta.