Highlighting the regulatory bottlenecks in the country’s fairly nascent and growing crypto market, India’s first and largest cryptocurrency exchange Zebpay has downed its shutters. This could also be a first such case where a market leader has succumbed to regulatory constraints.

The Reserve Bank of India in April this year issued a diktat barring banks and financial institutions from engaging with entities related to cryptocurrencies in the country and this has crippled the business of many firms, forcing them to take legal recourse against the regulator. While the Supreme Court is hearing all the crypto-related cases in the country, it is yet to give a final verdict.

Zebpay, founded in 2014 by Sandeep Goenka and Saurabh Agrawal, in a blogpost on September 28 stated that, “...we continued to look for solutions as we did not want India to miss the bus of digital assets that power the public blockchain. However, the recent past has been extremely difficult. 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. As a result, we are stopping our exchange activities.”

Zebpay played an important role in the cryptocurrency space by introducing the concept of blockchain, and cryptoassets, especially Bitcoin, to lakhs of Indians. The company has asked all its users to withdraw invested coins and tokens immediately.

The company added that “no new orders will be accepted until further notice”. It is not certain if the company plans to make a comeback once regulatory issues are sorted out, or shift operations to another country. Repeated calls and text messages by BusinessLine to CEO Ajeet Khurana went unanswered.

Industry reaction

Zebpay’s competitors and other players in the segment, told BusinessLine that while the event is unfortunate for the entire industry, they did not agree with the reason given by Zebpay for the shut-down.

Founder of another leading crypto exchange, requesting anonymity, said, “ There might be an inherent problem at Zebpay as the banking ban problem is equal for everyone. While players have found alternative solutions to stay in the business through peer to peer (P2P) trading, Zebpay did not want to innovate.”

Other players such as Koinex, Unocoin, Belfrics among ten others moved to P2P or other blockchain-related projects.

Ajeet Khurana, CEO of Zebpay, at a Blockchain event a couple of months ago, had clearly mentioned that the company had no intention of doing P2P or crypto-to-crypto trading.

Rahul Raj, founder of Koinex , when asked if Zebpay’s shutdown will impact the sector, said, “Every industry faces a knee-jerk reaction if a similar situation, but users will always find alternatives. We have seen a sudden spike in our user base, crypto deposits and in number of downloads post 12 noon.”

“While Zebpay has been a competitor, it’s unfortunate to see they’re shutting down their exchange. The crypto community needs to stay strong and stick together. We need to keep the crypto fire burning in India,” said Nischal Shetty, founder and CEO of P2P exchange WazirX and welcomed users to come and trade on his platform.

Crypto mania had reached its peak in India late last year when Bitcoin, the oldest crypto, touched a $18,000 high. However, regulatory hurdles globally and with RBI’s ban has kind of taken the sheen out of the space. Bitcoin’s value has eroded by more than half and is hovering at $6k at present.

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