The Indian cryptocurrency market is changing to accommodate the challenging times ahead. After the Reserve Bank of India effectively banned fiat to crypto trading, the exchanges are creating crypto-to-crypto trading platforms. New users can still take a position in these coins if they engage in peer-to-peer transactions.

RBI Provides a Grace Period

Indian investors were left wanting for more when the central bank made a surprise announcement to ring-fence the cryptocurrency market. On April 5, the RBI announced that all banks and financial institutions in the country should avoid dealing with cryptocurrency exchanges and companies.

It allowed a three-month period to end all banking relationships with crypto companies. The move created panic in the market, and several currencies lost as much as 30% of their market value hours since the announcement. The three-month period, which is originally set to end on June 6, has now been extended to July 6.

Exchanges Get Ready for a Challenge

For those who already hold cryptocurrencies in the country, trading is still possible. The central bank circular hasn’t penalized such transactions. So, getting hold of different coins by exchanging them with each other is still a viable option.

The first-time investors, however, could face some issues while buying these currencies. The only option left with them is peer-to-peer transactions.

Exchanges are considering these options, but their role in such an arrangement will be negligible. The platforms could, however, act as a bridge between buyers and sellers, who could conduct an offline transaction involving Indian Rupees to facilitate the trade.

Pundi X Chief Counsel David Ben Kay said:

“For instance, a customer can receive or spend cryptocurrency with a tap of the point-of-sale terminal which is connected to blockchain without the use of their mobile phones.”

He added:

“It takes less than 30 minutes for the transaction. We then liquidate the cryptocurrency into fiat in our own countries. However, for the ones who cannot receive crypto payment, we transact traditionally via bank transfers, which is a very tedious process wherein the banks double check on the source of payments.”

Stack of Bitcoin, Ethereum, Litecoin, Ripple and Monero coins on Indian flag. Source:
Stack of Bitcoin, Ethereum, Litecoin, Ripple and Monero coins on Indian flag. Source:

P2P Could Be a Breeding Ground for Frauds

The chances of frauds can never be entirely eradicated in a P2P exchange, especially when a crypto exchange does not facilitate it. Trust is a significant concern for such transactions. Nischal Shetty, who is the founder and CEO of a cryptocurrency exchange called WazirX, talked about these transactions and said:

“It works on the guarantee that you will get the cryptocurrency after giving cash. So, there are concerns about frauds or illegal transactions.”

Kay, for his part, noted:

“If the government or the Central bank oversees this technology, this redundant process (using PoS terminals) could be replaced successfully by blockchain transactions wherein there is no trust issue as it is most secured and is peer-to-peer.”

Currently, two Indian exchanges are offering crypto-to-crypto transactions: 1) Koinex, which offers 23 pairs and 2) Zebpay, which offers just one pair. Despite the challenges, the industry remains hopeful that tough times will help the industry flourish in the long run.

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