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Amid numerous scams, Indian Crypto-Currency industry readies code of conduct

Cryptocurrency bitcoins

You’re reading it here first: After several months of deliberation, India’s leading crypto-currency exchanges have finalised a code of conduct policy to be followed by all crypto-currency firms operating in the country. The code of conduct will be sent to the Reserve Bank of India (RBI) and the government for feedback based on which a final version will be released in the public domain.

Ever since the Supreme Court RBI’s struck down the RBI’s April 2018 circular, which barred banks from providing services crypto-firms in India, the domestic industry has been regulating itself. The Internet and Mobile Association of India (IAMAI), which had challenged the RBI’s circular, has been working with leading crypto-exchanges on the code of conduct policy for the past few months. Some of the companies that worked on the policy include Wazir X, CoinDCX, UnoCoin, ZebPay among others.

Since the crypto-currency industry remains unregulated in India, domestic crypto-firms have taken it upon themselves to prepare a uniform policy for all of them to abide by.

What aspects does the code cover? The code of conduct covers norms and standards on Know-Your-Customer (KYC), Anti-Money Laundering (AML), customer support and grievances, two-step verification for logins and fund withdrawals, financial and technical audit requirements, cyber-security standards and other aspects.

Nischal Shetty, founder and chief executive officer of WazirX told MediaNama that the aim is to ensure all exchanges and firms follow the same standards. “On KYC, we have mandated that crypto-firms conduct customer checks, Permanent Account Verification and address verification. The biggest factor on AML is that crypto-firms need to ensure that customers are bringing their own funds. For example, when they deposit money into the exchange it has to be from funds from their own bank account and not third-parties,” he said.

Today, all the crypto-exchanges are sharing information with each other and follow similar KYC and AML guidelines, says Gaurav Dahake, chief executive officer, BitBNS. “Overall, on the user-front, the code provides clarity on customer grievances. To a large degree, the biggest challenge is on the education front due to which customers fall for scams through social media or phishing tactics. The code of conduct will ensure that these processes are uniform and solved in a more consistent manner,” he said.

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Fewer crypto-scams today, claim industry insiders

As crypto-currency investing in India gains traction, scammers and hackers continue to remain active. In the past year, investigative authorities in India have nabbed several ponzi-scheme operators and hackers. According to CoinTelegraph, between 2017 and 2019 Indian investors lost almost $500 million to crypto-scams operating within India and abroad.

“In 2017, because the cyrpto community in India was new, many investors fell for these scams and they did not know who to believe as many exchanges came up overnight. But since then the ecosystem has matured a lot, the industry has been spreading a lot of information about crypto-investing and education. We have not seen fly-by-the-night operators coming up and selling cryptos like in the past,” Shetty said. He added today there are many influencers on social media who alert their followers of potential scams or illegitimate websites.

“We have been getting requests from cyber crime cells on crypto-scams, particularly on social media where people are selling goods in exchange for Bitcoins. But the scammer does not deliver the goods. While we get requests from the police to help with these scams, we have not seen any major scam occurring recently,” Shetty said.

Dahake said that the number of crypto-scams were far higher in 2017 than today. “Today, Telegram is widely used by these scamsters since the phone number is not visible. So the scammers can target customers by impersonating employees of an exchange through which they try to get access to the customers’ password and other details. Many of us have put in place controls like IP tracing, withdrawal restrictions and monitoring as well as secondary physical verification with the customer if we notice some odd withdrawal behaviour,” he said.

Recent crypto-scams unearthed

  • The Notorious Hacker
    Earlier last week, the Karnataka Police apprehended a 25-year hacker from Bengaluru who was in possession of ₹9 crore worth of Bitcoins. The hacker reportedly hacked three Bitcoin exchanges and 10 poker websites and also confessed to hacking government e-procurement sites, ANI reported. According to the Times of India, the hacker was also involved in illicit drug trade and hawala operations through which he converted Indian currency into Bitcoins.
  • An Obscure Trading Platform
    Last week, the Saket District Court in New Delhi agreed to hear grievances of investors who invested in crypto currencies through an online trading platform called IQ Option. The platform allegedly has duped many customers in India by restricting withdrawals. The investors were promised returns of upto 900% on investments, even with a $1 minimum investment, the petition says.
  • 3-Year Old Ponzi Scheme
    On January 1, Umesh Verma, a greetings card maker and jeweler was arrested at Indira Gandhi International Airport by the Economic Offences Wing of the Delhi Police for duping around 45 people of ₹2.5 crore through a crypto-currency scheme promising returns of 20-30%. Verma along with his son created an app called Pluto Exchange through which they sold a crypto-token or coin called ‘COIN ZARUS’ since 2017. Verma was arrested after investors complained that he had issued them post-dated cheques and constantly shifted his address to avoid the investors, according to an ANI report.
  • Fake Crypto-Coins
    In October last year, the Karnataka Police announced that it was investigating three companies that duped over a million customers from across the country to invest in a crypto-token called ‘Morris Coin’. The Police said that through three entities, investors were lured into investing ₹15,000 each and in return they would receive gains of ₹270 per day for the next 300 days. The scamsters offered 10 Morris coins to investors after the 300-day lock-in period and if they got more people to invest in the token investors could receive commissions of up 40%, the New Indian Express reported.
  • Hacked Crypto-Wallet
    In July last year, London-based crypto-currency firm Cashaa tweeted that one of its crypto-wallets with around 336 Bitcoins was compromised and the funds were transferred elsewhere. The company, which also has Indian operations and works with local crypto-exchanges, has filed a case with the Delhi Police.

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Reports on banking, payments, fintech and crypto-curencies. Additional reporting on media regulations, data protection and other areas.

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.



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