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Indian Banks Act Slow to Accept Crypto Industry Despite RBI’s Approval

Indian Banks Act Slow to Accept Crypto Industry Despite RBI’s Approval

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Indian banks are reluctant to work with crypto firms, even though RBI clears the air.

The repeal of a blanket ban on cryptocurrencies in March by India’s central bank, the Reserve Bank of India, has been a boon to the thriving crypto industry in India — with the launch of new exchanges being a catalyst. 

This is despite the country being one of the most severely affected nations by the COVID-19 pandemic, which has led to a deepening economic crisis across the nation. For investors and fintech innovators alike, cryptocurrency and blockchain technology have proven to be a much-needed respite in these challenging times.

Regulatory uncertainty

Repealing the blanket ban was not the ultimate solution that most had hoped it to be, as even after the repealing, there have been incidences of banks declining to process crypto transactions. However, there is more regulatory clarity in the industry now than there was back in 2017 when the degree of skepticism and confusion was at a high level.

A rumor of a note that was moved within the Ministry of Finance for intradepartmental consultation regarding a draft law that sought to ban all cryptocurrency-related activity — with a heavy fine or even a jail term of up to 10 years for offenders — had been swirling around, but it has recently been debunked. Corporate advisory firm AKM Global said that if the law gets passed in its current form, it “would completely decimate the crypto-industry in India.” This rumor brought back fears to the crypto community. However, Nischal Shetty, the CEO of crypto exchange WazirX, maintains faith in the government, telling Cointelegraph in an email exchange:

“On the day the news about the ‘note’ broke out, it created some panic among the community. But that’s all. We are not seeing any difference in the trading behaviour on WazirX since then. There have been speculations about crypto ban in the past as well. With more than 5 million crypto users in India, I’m confident that our Prime Minister won’t let us down.”

This positive outlook about the governing bodies is not shared by all experts in the industry. Siddharth Sogani, the founder of Crebaco — a research, rating and intel company for blockchain — fears the inadequate dissemination of knowledge within the governing bodies and iterates the need for a separate committee:

“Our government released the draft bill on crypto which was made by interns of National Institute of Financial Policy and Planning, without consulting even one industry or subject matter expert. There are several aspects to be taken care of while making policies in India. [...] A dedicated government body should be there which regulates this industry, without that it is impossible to regulate crypto in India.”

Reluctance by banks

In addition to the RBI, a few private banks have been reluctant to process crypto transactions for various firms in the industry. However, there is wide speculation as to why that is; it could just be a lack of understanding and knowledge of the industry as was seen with governing bodies. There might be, however, a deeper conflict of interest at play here. Sogani said: “Banks will always be against this industry globally because if crypto comes in action, P2P transactions will eliminate the need of third party bankers.”

In a more positive light, the skepticism of the banks could also be a function only of the limiting circumstances that they are subject to due to the lack of regulatory clarity maintained by the governing bodies like the RBI, according to Sogani:

“Banks in India are unclear how to treat Bitcoin transactions. They clearly don’t want to get their hands dirty when crypto regulations are not in place. Also, RBI had not removed or issued a new circular which tells the banks to start working with crypto companies again.”

However, in response to a right to information request filed by Harish BV, the co-founder of a local cryptocurrency exchange Unocoin, in late March, the RBI clearly stated that there are no restrictions on banks providing accounts to crypto firms and individual traders. This was the big RBI statement that banks were supposedly been waiting for, but the real quantitative impact remains to be seen.

Perceptions: Blockchain vs. cryptocurrency

Blockchain technology, cryptocurrency and transparency are what ledger technology offers and should ideally be a no-brainer for India where corruption and bribery are rampant, penetrating all walks of life. However, this potential has been marred by the lack of understanding and distorted portrayal of the facts by the mainstream media with a focus on the illicit activities that originate on the darknet.

Related: Crypto Regulatory Clarity in India: The Missing Piece to Mass Adoption

In India, blockchain technology has been embraced in various economic sectors like education and trade. Therefore, it is evident that the unique selling points of blockchain technology are being implemented, but skepticism surrounding cryptocurrency still exists. Elaborating on this, Gaurav Dahake, the CEO of crypto exchange Bitbns, stated:

“There’s confusion in terms of understanding the whole sector. Blockchain is good, cryptocurrency is bad seems to be the overall understanding, and traditional media has blown things out of proportion. Concerns revolve around money laundering, use in illicit activities. We as exchanges have tried addressing this.”

With all factors surrounding governance and regulatory bodies considered, it’s important to remember that blockchain technology is a disruption to the stipulated growth of the financial markets. Thus, it’s ideally not meant to co-exist within the rules, according to Sogani: “Crypto industry, specifically Bitcoin and its surrounding ecosystem, is designed to be above the regulators. Even when the RBI blanket ban was in force, P2P exchanges were blooming.”

In the absence of a proper regulatory framework, exchanges and other major players have been stepping up to self regulate and/or contribute to the policy framework, like Ripple’s recent proposal. Dahake further added: “We follow almost 60% of things that are usually prescribed to brokers or trading exchanges.”

With the RBI’s statement that there is no prohibition on banks to deal with crypto firms and traders, there is now a clear message to a demographic of 1.3 billion: There are no legal issues with holding and transacting in this asset class. The sheer enormity of the demographic is bound to have a significant impact on the global crypto industry, whose major players will look to invest and drive business in India. The RBI, the government and crypto firms will need to work together to sustain the growth seen in 2020.

Volumes and user growth

Indeed, the crypto industry seems to be growing. The increase in interest is measured in terms of volume and the number of users in the leading cryptocurrency exchanges in India like WazirX — which was acquired by Binance in late 2019 — Bitbns, CoinDCX, just to name a few. Shetty told Cointelegraph that WazirX’s daily trading volumes have increased 10 times compared to pre-lockdown volumes, adding:

“The Indian crypto ecosystem has been rapidly growing ever since the Supreme Court struck down RBI’s banking ban. We’re seeing a steady growth in user signups every month. In fact, the Indian crypto industry is very optimistic about crypto’s future.”

Apart from the validation the industry received when the blanket ban was lifted by the Supreme Court, one of the integral reasons for this growth is the diminishing returns of the traditional capital markets. BSE Sensex and Nifty 50, indices that are considered to be representative of the country’s stock market and general investor sentiment, are both down approximately 15% this year despite the country’s stock markets rallying in May and June.

This superiority in return has also been observed when comparing the returns of Bitcoin to the Indian rupee against the popular asset classes in India, such as gold and fixed deposits. According to Dahake in an email conversation with Cointelegraph, this crash in market assets has forced investors to look for other avenues of returns in their portfolios, and crypto assets have answered the call, showing much higher returns than other asset classes:

“Equities return for 3 years is negative. FD returns have gone down from 8%–9% to 5.5% now over the last 5 years. Rupee has depreciated by over 20% with respect to the dollar in the last 2 years and by over 100% in the last 12 years. Bitcoin as a whole has outperformed massively all of these asset classes. So users are interested in diversifying into Bitcoin.”

Another reason for this growth is the dissemination of crypto education that has happened during the rigorous lockdown. Traditional investors have found the inclination to educate themselves about the cryptocurrency market due to the equity market crash, and rudimentary investors have found time to learn about the basics of blockchain technology and cryptocurrency to enable themselves to make more lucrative investments than those available in the traditional capital markets.

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Key shipping company files for Chapter 11 bankruptcy

The Illinois-based general freight trucking company filed for Chapter 11 bankruptcy to reorganize.

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The U.S. trucking industry has had a difficult beginning of the year for 2024 with several logistics companies filing for bankruptcy to seek either a Chapter 7 liquidation or Chapter 11 reorganization.

The Covid-19 pandemic caused a lot of supply chain issues for logistics companies and also created a shortage of truck drivers as many left the business for other occupations. Shipping companies, in the meantime, have had extreme difficulty recruiting new drivers for thousands of unfilled jobs.

Related: Tesla rival’s filing reveals Chapter 11 bankruptcy is possible

Freight forwarder company Boateng Logistics joined a growing list of shipping companies that permanently shuttered their businesses as the firm on Feb. 22 filed for Chapter 7 bankruptcy with plans to liquidate.

The Carlsbad, Calif., logistics company filed its petition in the U.S. Bankruptcy Court for the Southern District of California listing assets up to $50,000 and and $1 million to $10 million in liabilities. Court papers said it owed millions of dollars in liabilities to trucking, logistics and factoring companies. The company filed bankruptcy before any creditors could take legal action.

Lawsuits force companies to liquidate in bankruptcy

Lawsuits, however, can force companies to file bankruptcy, which was the case for J.J. & Sons Logistics of Clint, Texas, which on Jan. 22 filed for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Western District of Texas. The company filed bankruptcy four days before the scheduled start of a trial for a wrongful death lawsuit filed by the family of a former company truck driver who had died from drowning in 2016.

California-based logistics company Wise Choice Trans Corp. shut down operations and filed for Chapter 7 liquidation on Jan. 4 in the U.S. Bankruptcy Court for the Northern District of California, listing $1 million to $10 million in assets and liabilities.

The Hayward, Calif., third-party logistics company, founded in 2009, provided final mile, less-than-truckload and full truckload services, as well as warehouse and fulfillment services in the San Francisco Bay Area.

The Chapter 7 filing also implemented an automatic stay against all legal proceedings, as the company listed its involvement in four legal actions that were ongoing or concluded. Court papers reportedly did not list amounts for damages.

In some cases, debtors don't have to take a drastic action, such as a liquidation, and can instead file a Chapter 11 reorganization.

Truck shipping products.

Shutterstock

Nationwide Cargo seeks to reorganize its business

Nationwide Cargo Inc., a general freight trucking company that also hauls fresh produce and meat, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Illinois with plans to reorganize its business.

The East Dundee, Ill., shipping company listed $1 million to $10 million in assets and $10 million to $50 million in liabilities in its petition and said funds will not be available to pay unsecured creditors. The company operates with 183 trucks and 171 drivers, FreightWaves reported.

Nationwide Cargo's three largest secured creditors in the petition were Equify Financial LLC (owed about $3.5 million,) Commercial Credit Group (owed about $1.8 million) and Continental Bank NA (owed about $676,000.)

The shipping company reported gross revenue of about $34 million in 2022 and about $40 million in 2023.  From Jan. 1 until its petition date, the company generated $9.3 million in gross revenue.

Related: Veteran fund manager picks favorite stocks for 2024

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Key shipping company files Chapter 11 bankruptcy

The Illinois-based general freight trucking company filed for Chapter 11 bankruptcy to reorganize.

Published

on

The U.S. trucking industry has had a difficult beginning of the year for 2024 with several logistics companies filing for bankruptcy to seek either a Chapter 7 liquidation or Chapter 11 reorganization.

The Covid-19 pandemic caused a lot of supply chain issues for logistics companies and also created a shortage of truck drivers as many left the business for other occupations. Shipping companies, in the meantime, have had extreme difficulty recruiting new drivers for thousands of unfilled jobs.

Related: Tesla rival’s filing reveals Chapter 11 bankruptcy is possible

Freight forwarder company Boateng Logistics joined a growing list of shipping companies that permanently shuttered their businesses as the firm on Feb. 22 filed for Chapter 7 bankruptcy with plans to liquidate.

The Carlsbad, Calif., logistics company filed its petition in the U.S. Bankruptcy Court for the Southern District of California listing assets up to $50,000 and and $1 million to $10 million in liabilities. Court papers said it owed millions of dollars in liabilities to trucking, logistics and factoring companies. The company filed bankruptcy before any creditors could take legal action.

Lawsuits force companies to liquidate in bankruptcy

Lawsuits, however, can force companies to file bankruptcy, which was the case for J.J. & Sons Logistics of Clint, Texas, which on Jan. 22 filed for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Western District of Texas. The company filed bankruptcy four days before the scheduled start of a trial for a wrongful death lawsuit filed by the family of a former company truck driver who had died from drowning in 2016.

California-based logistics company Wise Choice Trans Corp. shut down operations and filed for Chapter 7 liquidation on Jan. 4 in the U.S. Bankruptcy Court for the Northern District of California, listing $1 million to $10 million in assets and liabilities.

The Hayward, Calif., third-party logistics company, founded in 2009, provided final mile, less-than-truckload and full truckload services, as well as warehouse and fulfillment services in the San Francisco Bay Area.

The Chapter 7 filing also implemented an automatic stay against all legal proceedings, as the company listed its involvement in four legal actions that were ongoing or concluded. Court papers reportedly did not list amounts for damages.

In some cases, debtors don't have to take a drastic action, such as a liquidation, and can instead file a Chapter 11 reorganization.

Truck shipping products.

Shutterstock

Nationwide Cargo seeks to reorganize its business

Nationwide Cargo Inc., a general freight trucking company that also hauls fresh produce and meat, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Illinois with plans to reorganize its business.

The East Dundee, Ill., shipping company listed $1 million to $10 million in assets and $10 million to $50 million in liabilities in its petition and said funds will not be available to pay unsecured creditors. The company operates with 183 trucks and 171 drivers, FreightWaves reported.

Nationwide Cargo's three largest secured creditors in the petition were Equify Financial LLC (owed about $3.5 million,) Commercial Credit Group (owed about $1.8 million) and Continental Bank NA (owed about $676,000.)

The shipping company reported gross revenue of about $34 million in 2022 and about $40 million in 2023.  From Jan. 1 until its petition date, the company generated $9.3 million in gross revenue.

Related: Veteran fund manager picks favorite stocks for 2024

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Tight inventory and frustrated buyers challenge agents in Virginia

With inventory a little more than half of what it was pre-pandemic, agents are struggling to find homes for clients in Virginia.

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No matter where you are in the state, real estate agents in Virginia are facing low inventory conditions that are creating frustrating scenarios for their buyers.

“I think people are getting used to the interest rates where they are now, but there is just a huge lack of inventory,” said Chelsea Newcomb, a RE/MAX Realty Specialists agent based in Charlottesville. “I have buyers that are looking, but to find a house that you love enough to pay a high price for — and to be at over a 6.5% interest rate — it’s just a little bit harder to find something.”

Newcomb said that interest rates and higher prices, which have risen by more than $100,000 since March 2020, according to data from Altos Research, have caused her clients to be pickier when selecting a home.

“When rates and prices were lower, people were more willing to compromise,” Newcomb said.

Out in Wise, Virginia, near the westernmost tip of the state, RE/MAX Cavaliers agent Brett Tiller and his clients are also struggling to find suitable properties.

“The thing that really stands out, especially compared to two years ago, is the lack of quality listings,” Tiller said. “The slightly more upscale single-family listings for move-up buyers with children looking for their forever home just aren’t coming on the market right now, and demand is still very high.”

Statewide, Virginia had a 90-day average of 8,068 active single-family listings as of March 8, 2024, down from 14,471 single-family listings in early March 2020 at the onset of the COVID-19 pandemic, according to Altos Research. That represents a decrease of 44%.

Virginia-Inventory-Line-Chart-Virginia-90-day-Single-Family

In Newcomb’s base metro area of Charlottesville, there were an average of only 277 active single-family listings during the same recent 90-day period, compared to 892 at the onset of the pandemic. In Wise County, there were only 56 listings.

Due to the demand from move-up buyers in Tiller’s area, the average days on market for homes with a median price of roughly $190,000 was just 17 days as of early March 2024.

“For the right home, which is rare to find right now, we are still seeing multiple offers,” Tiller said. “The demand is the same right now as it was during the heart of the pandemic.”

According to Tiller, the tight inventory has caused homebuyers to spend up to six months searching for their new property, roughly double the time it took prior to the pandemic.

For Matt Salway in the Virginia Beach metro area, the tight inventory conditions are creating a rather hot market.

“Depending on where you are in the area, your listing could have 15 offers in two days,” the agent for Iron Valley Real Estate Hampton Roads | Virginia Beach said. “It has been crazy competition for most of Virginia Beach, and Norfolk is pretty hot too, especially for anything under $400,000.”

According to Altos Research, the Virginia Beach-Norfolk-Newport News housing market had a seven-day average Market Action Index score of 52.44 as of March 14, making it the seventh hottest housing market in the country. Altos considers any Market Action Index score above 30 to be indicative of a seller’s market.

Virginia-Beach-Metro-Area-Market-Action-Index-Line-Chart-Virginia-Beach-Norfolk-Newport-News-VA-NC-90-day-Single-Family

Further up the coastline on the vacation destination of Chincoteague Island, Long & Foster agent Meghan O. Clarkson is also seeing a decent amount of competition despite higher prices and interest rates.

“People are taking their time to actually come see things now instead of buying site unseen, and occasionally we see some seller concessions, but the traffic and the demand is still there; you might just work a little longer with people because we don’t have anything for sale,” Clarkson said.

“I’m busy and constantly have appointments, but the underlying frenzy from the height of the pandemic has gone away, but I think it is because we have just gotten used to it.”

While much of the demand that Clarkson’s market faces is for vacation homes and from retirees looking for a scenic spot to retire, a large portion of the demand in Salway’s market comes from military personnel and civilians working under government contracts.

“We have over a dozen military bases here, plus a bunch of shipyards, so the closer you get to all of those bases, the easier it is to sell a home and the faster the sale happens,” Salway said.

Due to this, Salway said that existing-home inventory typically does not come on the market unless an employment contract ends or the owner is reassigned to a different base, which is currently contributing to the tight inventory situation in his market.

Things are a bit different for Tiller and Newcomb, who are seeing a decent number of buyers from other, more expensive parts of the state.

“One of the crazy things about Louisa and Goochland, which are kind of like suburbs on the western side of Richmond, is that they are growing like crazy,” Newcomb said. “A lot of people are coming in from Northern Virginia because they can work remotely now.”

With a Market Action Index score of 50, it is easy to see why people are leaving the Washington-Arlington-Alexandria market for the Charlottesville market, which has an index score of 41.

In addition, the 90-day average median list price in Charlottesville is $585,000 compared to $729,900 in the D.C. area, which Newcomb said is also luring many Virginia homebuyers to move further south.

Median-Price-D.C.-vs.-Charlottesville-Line-Chart-90-day-Single-Family

“They are very accustomed to higher prices, so they are super impressed with the prices we offer here in the central Virginia area,” Newcomb said.

For local buyers, Newcomb said this means they are frequently being outbid or outpriced.

“A couple who is local to the area and has been here their whole life, they are just now starting to get their mind wrapped around the fact that you can’t get a house for $200,000 anymore,” Newcomb said.

As the year heads closer to spring, triggering the start of the prime homebuying season, agents in Virginia feel optimistic about the market.

“We are seeing seasonal trends like we did up through 2019,” Clarkson said. “The market kind of soft launched around President’s Day and it is still building, but I expect it to pick right back up and be in full swing by Easter like it always used to.”

But while they are confident in demand, questions still remain about whether there will be enough inventory to support even more homebuyers entering the market.

“I have a lot of buyers starting to come off the sidelines, but in my office, I also have a lot of people who are going to list their house in the next two to three weeks now that the weather is starting to break,” Newcomb said. “I think we are going to have a good spring and summer.”

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