Crypto Withdrawals:
Why are Indian crypto exchanges selective in allowing crypto withdrawals?
I’ve been seeing a lot of people asking questions around this. There has been a lot of confusion regarding crypto withdrawals.
The major reason for many crypto exchanges in India being selective with enabling crypto withdrawals is due to the compliance risk attached with it.
Here’s the scenario and unfortunately there’s no easy solution to this scenario.
1. Crypto exchange performs KYC and AML checks on customer X
2. Customer X clears this process successfully (KYC is genuine)
3. Customer X deposits INR 1L
4. Customer X buys crypto and withdraws it
5. Law enforcement gets a complaint from Person A that Customer X cheated them of INR 1L
6. Law enforcement checks bank account of Customer X and realises that Customer X transferred INR 1L to exchange account
7. Law enforcement freezes INR 1L in crypto exchange bank account
8. Crypto exchange checks Customer X crypto account but all the crypto has been withdrawn.
9. When law enforcement finally finds Customer X, it realises that Customer X has no idea as they simply did KYC but the account was controlled by someone else who gave them INR 100 to complete account opening.
10. The money of crypto exchange is now stuck.
This is one of the major risks involved in crypto withdrawals.
The good thing is that at WazirX we’re rolling out multi level KYC (it’s under testing).
With multi level KYC, we will be able to build more confidence on the customer profiles. Based on this increased confidence we will be able to roll out crypto withdrawals to a larger number of customers.
Crypto only foreign exchanges don’t need to worry about these scenarios since they don’t accept fiat. Hence opening crypto withdrawals is straightforward.
Indian crypto ecosystem has its own set of unique challenges. Over time we will sail through these issues as we learn and get better at navigating these hurdles.
Hope this clears some of the confusion.
tamilbtc.com/wazirx
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