How Local Crypto Exchanges are Circumventing India’s New Bitcoin Ban
Crypto exchanges in India can no longer facilitate fiat-to-crypto trading. This is according to Shubham Yadav, the co-founder of Coindelta.
Central Bank Maintains Ban On Crypto
The Reserve Bank of India, which is the country’s central bank, first imposed the ban on cryptocurrency trading in April; a move that has barred local banks from providing banking services to crypto exchanges effectively.
On July 3, the Supreme Court of India declined to lift a ban that was prohibiting RBI from trading in cryptocurrency, thus putting a clear notice that banks cannot deal with cryptocurrency exchanges in India.
As the Supreme Court is expected to listen to the case of the ban imposed on cryptocurrency industry against the RBI, the local exchanges will, however, not be able to support any fiat-to-crypto transaction until the court officially reverses the decision on the existing ban.
Yadav, the founder of Coindelta (a local cryptocurrency trading platform), said during an interview with Quartz that local exchanges have advanced from fiat-to-cryptocurrency trades to crypto- only trades, and are competing against major exchanges like Binance.
Relying On Peer-To-Peer Platforms
Because of this move, the investors in India are required to rely on peer-peer platforms like LocalBitcoins in order to trade their digital assets. This forces the investors to acquire bitcoin first and then trade other cryptocurrencies on crypto-only exchanges.
Yadav expressed his fears over the dependence on peer-to-peer marketplaces by investors, with his main concern being the danger of using a platform like that one which has an unknown number of investors and individuals.
“Earlier, a lot of these transactions were taken offline and completed, which led to a possibility of being robbed or even when it was online, you didn’t know the person with whom you were dealing and there were chances that the deal could go awry,’Yadav said.
Local investors in India have no intentions or incentive to utilize exchanges in India over platforms like Binance, Bittrex, and Huobi due to lack of support of the Indian rupee. Exchanges in India could initially serve the local market and process fiat-to-crypto trades. Within months, local exchanges had to turn their businesses to compete with multi-billion dollar platforms, which had significant access, control, raw materials, and money.
The Malaysian cryptocurrency exchange Belfrics CEO, with their operations in India, Praveen Kumar, said that the cryptocurrency in India will struggle to stay alive and succeed without fiat trading pairs, thus falling below average compared to neighboring markets that have already imposed practical regulatory frameworks and regulations to promote the growth of local crypto and blockchain business.
“There are measures that we are taking in the meantime, but for the industry to survive with all the other global exchanges that offer crypto-to-crypto or P2P trade,” said Kumar.
Overly Strict Regulations Kill Markets
More practical and efficient regulations to ascertain that cryptocurrency exchanges, blockchain projects, and base layers can grow without being negatively impacted by overly strict regulations have started to be implemented by major economies like Japan, U.S, and South Korea.
It’s saddening that the government of India has decided to delay its country in the blockchain race and the fourth industrial revolution while major countries have given a nod to the potential of crypto and blockchain technology. This move is likely to cost the Indian government.