cryptocurrency: Crypto exchanges under the thumb as uncertainty mounts

Mumbai: Investors are intensifying pressure on Indian cryptocurrency exchanges as the regulatory environment in the country has become unpredictable and fraught with risk, said four people with knowledge of the matter. Some are asking exchanges for higher stakes as milestones haven’t been met. Others are frustrated at their inability to exit because ongoing deals have been put on hold after banks and Paytm refused to allow cryptocurrency transactions on their platforms.

“The biggest problem is of uncertainty. The investors are nervous and in pause mode,” said a senior M&A lawyer who’s part of such a transaction.

ET spoke to several lawyers and consultants who are involved in several deals, representing exchanges and investors. They cited increasing regulatory risk as the key reason for investor discomfort. China’s recent crackdown on cryptocurrency has added to nervousness.

Many investors in exchanges are triggering protection clauses, insiders said. “We have heard reports about additional clauses being triggered to represent investor protection under regulatory stress but we have yet to receive a similar clause by any known entity,” said Shivam Thakral, CEO of cryptocurrency exchange BuyUcoin.

Some investors are looking at this as a consolidation opportunity and have asked companies to be on the lookout for inorganic expansion.

Since investments are linked to milestones, last week’s developments mean negative clauses will be triggered. Most banks have severed ties with cryptocurrency exchanges after the RBI informally told them to reconsider such links.