Local cryptocurrency exchanges affected by regulations restricting fiat-to-crypto trading have found a way survive and even continue to be profitable, according to a Quartz report.
The trouble began in April, when the Reserve Bank of India (RBI) originally placed a ban on crypto trading that stopped banks from being able to provide services to cryptocurrency exchanges. Then, Quartz reported that the RBI refused to lift its ban and demanded that Indian lenders “terminate all banking relationships” with the exchanges by July 5th.
P2P Exchanges Trade Crypto-to-Fiat, While Other Crypto Exchanges Trade Crypto-to-Crypto
Now that the exchanges are cut off from fiat, many of them–Koinex, Unocoin, Zebpay, WazirX, and others–have made a complete switch to crypto-to-crypto trade. The exchanges collect trading commissions on each of the transactions that their customers send.
Still, the exchanges aren’t completely ‘in the clear’–because of regulatory restrictions, these crypto exchanges have been forced to rely on the trading business of users who already have cryptocurrency to use on their platforms. Users who don’t have crypto will need to first purchase Bitcoin or another cryptocurrency through peer-to-peer exchanges (ie Paxful and LocalBitcoins) that connect buyers and sellers directly to one another.
Exchange operators don’t see this as a permanent fix. “There are measures that we are taking in the meantime, but for the industry to survive and thrive, fiat transactions need to be allowed,” said chairman and CEO of Belfrics, Praveen Kumar. “Else, we end up competing with all the other global exchanges that also offer crypto-to-crypto or P2P trade.”
Peer-to-peer exchanges carry their own set of risks, including dishonest dealings– Shubham Yadav, co-founder of Indian crypto exchange Coindelta, told Quartz that ”earlier, a lot of these [crypto-to-fiat] transactions were taken offline and completed, which led to a possibility of being robbed. [Even] when it was online, you didn’t know who you were dealing with and there were chances that the deal could go awry.”
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Coindelta launched its own peer-to-peer trading platform last week.
Coindelta announced a Peer to Peer exchange called Flux.
— Coin Crunch India (@coincrunchin) July 4, 2018
Yadav said that his platform is ramping up KYC requirements in order to prevent users from malicious behavior.
The ban against bank-to-exchange interactions may not be around for long–some of the exchanges have challenged RBI, and are due in front of India’s supreme court on July 20. The Modi government is also due to publish a draft of cryptocurrency regulations sometime this month.