Indian crypto exchanges freeze suspicious accounts as Bitcoin reached $40000

By Neil Borate | LiveMint

8 January, 2021

MUMBAI: Cryptocurrency exchanges in India have stepped up their efforts to detect suspicious activities and clamp down on ‘pump and dump’ schemes, as bitcoin breached the $40,000 mark yesterday. CoinDCX, a large cryptocurrency exchange said that it has frozen 4 accounts which were used for artificially pushing up the price of smaller cryptos in a bid to lure retail investors to enter at inflated prices.

India lacks any formal KYC rules or exchange regulations for cryptocurrency and hence exchanges have devised their own rules. The lack of regulation comes even as the US Financial Crimes Enforcement Network (FINCEN) has proposed compulsory KYC norms for transfers of cryptocurrency to non-custodial wallets above $3,000.

“There have been instances where certain transactions were red flagged when they were in conflict with AML policies on the exchange and we had to seek details on source of funds from the customers,” said Monark Modi, founder and CEO, Bitex, a UAE based cryptocurrency exchange that has operations in India.

“At Bitex in addition to ensuring strict KYC, we also have stringent Anti Money Laundering (AML) policies that ensures that transactions done on the exchange are legitimate and in accordance with regulations,” he added. Neeraj Khandelwal, co founder, CoinDCX warned investors against investing in small cryptocurrencies without adequate knowledge. “While small cap crypto coins may look lucrative, similar to penny stocks, it is imperative that new cryptocurrency investors do adequate research about the projects, team, investor backing, technicals, and fundamentals before investing in low price and illiquid markets,” he said. “We observed pump and dump manoeuvres by operators in small cap, low trading volumes crypto coins and we estimate this has affected multiple users across the globe. We have proactively identified and frozen 4 accounts of such persons,” he added.

The heightened push towards compliance comes even as interest in crypto investing has surged in India. WazirX, India’s largest cryptocurrency exchange, now reports a user base of over 1 million, up from the 550,000 users it mentioned in a blogpost in June 2020. The exchange reported transactions worth $2.34 billion in 2020. However 70% of its users were below the age of 34 and 85% were men, according to data released to Mint by the cryptocurrency exchange. The market capitalisation of cryptocurrencies surged past the $1 trillion mark on the back of a sharp rally over the past month. Bitcoin surpassed its 2017 peak of just under $20,000 on 16 December 2020 and currently trades close to $40,000.

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