The restrictions put in place by the Reserve Bank of India (RBI) on banks dealing with cryptocurrencies has had an unintended victim – a local police force. The Times of India reports that after seizing over a million dollars’ worth of cryptocurrency from a scammer, the proceeds from their sale are now tied up in the legal system after the bank froze the money, in accordance with their interpretation of the RBI’s rules.
In other news. Koinex helped Pune cops sell 244 BTC seized from Gain Bitcoin scam, and now Pune police can’t take the funds to their treasury because koinex’s bank account is frozen.
INR 8.42 crore on the line.
— Naimish Sanghvi (@ThatNaimish) October 3, 2019
Pune City Police Funds Frozen
Pune City police department had initially chalked up the closure of a Ponzi scheme, Gainbitcoin, as a victory, seizing a total of 244 coins, including an unspecified amount of BTC, from an individual associated with the scam. This equated a tidy haul of Rs 8.42 crore (around $1.2 million) in crypto, which the police department sold via Discidium Internet Labs Private Ltd., operators of the Indian exchange Koinex. However, the funds were frozen the moment they entered Discidium’s bank account, although the RBI has since denied freezing the funds or ordering the bank to do so, resulting in Discidium appealing to the Supreme Court in order to get the funds released. The entire event is symptomatic of a system where attitudes towards cryptocurrency continue to change and official regulations are continually delayed.
Koinex One of Many Victims
The decision to prohibit all banks and payment system providers from dealing in cryptocurrencies was publicized in early April, including activities such as “maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer / receipt of money in accounts relating to purchase/ sale of VCs [virtual currencies].” The ban came into effect in July, with the immediate result that exchanges such as Koinex were either forced to close down or drastically change their business practices, with the result that users deserted them. Koinex itself was forced to close at the end of June, stating that their bank accounts, which included user funds, were frozen, with no end to the crisis in sight.