When a new business opportunity presents itself, all are so excited to explore it, so optimistic to jump into it and many times since it’s a new opportunity and you have started venturing into it pretty early, your going to experience benefits because things are rather easy but once competition kicks in doing business gets hard. That’s fine, but there is one more element and an important factor to add to all this and that’s regulation. Even competition for doing a business is healthy, but if you have a regulatory environment that’s not favorable for the business you want to do then your business can’t survive easily atall.
Recently, in the past 2 years crypto currency exchange business posed an attractive business opportunity for entities and since cryptos were not noticed by Governments till last year, the crypto exchanges that sprouted out during the 2017 period during the famous crypto boom did well making loads of revenues and profits, those days were good. However, last year Governments have been taking a stance on crypto and this has influenced crypto businesses and ultimately entry of crypto investors, crypto adoption and growth of digital currency economy etc in the country.
In countries like India where I belong crypto businesses are facing what I can call troubles and disturbances because of Government stance. Those crypto businesses that are surviving are doing so adapting and finding a way over the stringent laws and orders of the Government and financial authorities. This involved a lot of alternative solutions. Many exchanges had to close down after India's central bank RBI implemented its notification that banks under it cannot have any dealings with entities that do any sort of crypto transactions. This meant investors cannot have their cryptos that they had liquidated into fiat in the exchange, withdrawn from their exchange wallet into their bank account.
Indian crypto exchange Zebpay was a casualty that admitted that it was not possible for them to survive in a country where Government and Financial authorities ban it from using regulated banking services making customers find it impossible to withdraw fiat from their exchange wallers into their bank accounts. Zebpay was forced to close down thanks to Government regulations, and this was done after waiting for judgments in court where they hoped Government would at least regulate crypto, and let crypto exchanges that took provisions against money laundering by having only KYC compliant traders use their platform, function normally using banking services. However, Government and RBI was not open to this.
Hope was lost when in each court hearing RBI was not willing to take any favorable stance in regards to crypto regulation. Zebpay closed very sadly and in a few months opened business in Malta but the irony of this is that Indian investors cannot use Zebpay crypto exchange now.
Post this, other crypto exchanges like Koinex survived by investing in other solutions like peer 2 peer trading. This was an innovation indeed, where buyers and sellers can trade in cryptos safely without getting cheated by any party in the process as there was escrow provision etc. With the escrow provision seller gets money, buyer gets cryptos where they are sent to the escrow that acts like an intermediary , confirming the receipt of sent money and cryptos after which only it would be released to buyer/seller. I think Koinex’s P2P trading provision was called Loop.
Later Koinex found a way for traders to have liquidity immediately through a process, where sellers and buyers are matched and buyers transfer the fiat amount to the sellers bank account. Seller meanwhile will have fiat money in his/her INR exchange wallet after selling cryptos, this money will get transferred to the buyer’s INR wallet exchange which buyer would use to buy cryptos.
The advantage about this complicated process is that one can liquidate the crypto holdings , immediately in the exchange, this was not possible in P2P platform. P2P platform required manual matching of buyers/sellers who were not online all the time. It took time for a transaction to take place and there was no certainty of it because after showing interest to purchase and pay for cryptos, the buyer may decline and cancel the transaction, by which time crypto value may have come down.
Koinex was not only a safe platform for me to liquidate my crypto holdings, but it eased the process of doing crypto transactions even when Indian Govt. made things really difficult for crypto exchanges to function.
Another challenge for exchanges was safeguarding investors funds and it looks like Koinex had to invest in maintenance infrastructure for safeguarding funds that can be hacked. Sometime after Binance exchange was hacked, koinex locked the wallets of investors saying they are upgrading infrastructure. No one knows why, that upgrade looks 3-4 days time. During this time, the deposit and withdrawal wallets were locked and users could not withdraw their money nor even know about the cryptos that was sent into their Koinex deposit wallet, it was all locked. At this time, its possiblethat investors got angry and Koinex lost customers. Fortunately, it was the weekend when ETH and BTC surged, I think ETH went from 173$ to 200$, so no one lost money.
I suspect that maybe Koinex was hacked that time but not sure, however my funds in ETH was all good after this few days of delay and I could use Koinex to liquidate my cryptos and get money. It is possible Koinex had to make more provisions to keep investor funds safe and they could not get funds for this from banks, as banks are not servicing crypto exchanges, so maybe they decided to close down?
However, of late, Koinex I see constantly locked investor wallets saying maintenance, I am sure that maintenance was related to safeguarding the crypto investors funds. I am guessing this was a challenge for koinex, even though they made sure good security was taken to secure a users account. We can for instance login into Koinex only through pin given by google authenticator somewhat like Binance Exchange. It’s a good security step that many exchanges do not have. Besides this, I can transfer cryptos to other addresses only after confirming a mail that authorities my transaction that I did in Koinex account.
Therefore, I bid a goodbye to Koinex with a heavy heart. It is true this month as I liquidated my ETH in koinex, I got really low value for the ETH about 40$ less. That angered me true. However, the reason for Koinex having such low value for cryptos with such a wide difference from market crypto value is because it probably lost a lot of customers due to some issues that I explained above. This meant there was very low volume of trades in the exchange and price of cryptos were not competitive, it was low due to low demand and supply of cryptos in Koinex. I had decided that I would never use Koinex as there are other exchanges giving good market value for your cryptos , but even so feel sad for Koinex closing down, overall they actually gave good service whenever I did crypto trades.
It’s just a terrible environment for crypto enthusiasts in India. There are news reports that Government plans to introduce a law to jail anyone dealing with cryptos for 10 years. You know these news scare us when we are just getting used to the concept of crypto. I also am thinking of getting paid through paypal if are further problems in doing crypto dealings, but I dislike paypal): .
I just feel so sad at times that its very difficult to be a crypto enthusiast in India. I may have to learn about paper wallets just to store some of my crypto investments in a way that it’s not visible to anyone, just incase you know...
However, for now, Indian Government is not able to declare cryptos as illegal so everything is ok, however I am terriblely sad that an Indian Exchange I used to use has closed its shutters. But life goes on, with or without Koinex, for now at least I can still receive cryptos and liquidate it easily thanks to other exchanges, I am grateful for that.