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Issues of Commingling In Crypto-Exchange

Yes, you heard it right. It is a common practice that Cryptocurrencies of investors are clubbed together and kept in an account under the control of exchanges. Exchange owners own these accounts, and you are just renting a small space in their home wallet. This means that many others like you share space in the same wallet, which gives the exchange an undue power to conduct untraceable transactions within the same wallet that are not recorded on the Blockchain.

The Reason Why Government Does Not Like It

Even though the Indian Government favors blockchain technology which forms the basis of Cryptocurrency, they want to regulate all the cryptocurrency transactions happening across platforms and exchanges for Indian investors. Commingling is defeating the foundation of blockchain technology as no records are maintained on the Blockchain regarding the transactions within the wallet. There is no accurate wallet exchange happening if the transactions are being done within the same wallet, and hence record keeping of these transactions are controlled by exchange owners only.
Also, the keys to the wallet are in control by the exchange owners, and it risks the individual investor’s wealth in case an exchange gets bolted. This is a potential carter of money laundering and has severe systematic issues. Hence, the Indian Government does not favor private crypto exchanges in their current form.

Also, Commingled accounts are more prone to hacking attacks as money from various investors is pooled into a single wallet.

Trust Only Clean And Open Blockchain Crypto Players.

The Government wants to bring regulatory bodies like that we have for Stock exchanges along with requirements for carrying out transactions in a separate wallet for each crypto user to bring transparency to the model. It is a remote possibility that Government may ban open blockchain cryptocurrencies that are already in compliance with most of the requirements. Crypto investors must own their private keys and trade only in recognized exchanges.

However, it is still a wait-and-watch situation for the crypto investors in India.

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