It seems it is difficult to ban when it comes to crypto currencies. This is because, despite being banned from dealing with banks, a few exchanges have found a new way to buy or sell digital currencies, such as Bitcoin, in India. WazirX and Koinex have reportedly launched peer-to-peer platforms for trading in digital currencies using Indian rupees.
On April 6, the Reserve Bank of India (RBI) post its monetary policy meeting gave a three-month window that all banks and RBI-regulated entities should stop transacting with crypto currency exchanges. As a result of the RBI directive, all banks stopped dealing with crypto currency exchanges from July 6, 2018 .
While many cash out from their investments at a loss, others are still holding on to their Bitcoins with exchanges on the hope that some decision will be made in their favour soon. The point to note is the regulator has only banned banks from dealing with exchanges but it has not made crypto currencies illegal.
A committee headed by Subhash Chandra Garg, secretary, department of economic affairs of the ministry of finance, is expected to come out with recommendations soon.
Rahul Raj, co-founder and CEO, Koinex, was quoted as saying in Mint, “If you are a new entrant to the crypto ecosystem, you can purchase a crypto asset directly by transferring INR to a seller. That is your first entry point. Similarly, you can exit by selling it in exchange for INR.”
In the past trading in crypto currencies was done through the bank account of exchanges. But now the money goes directly into the bank account of the seller from the bank account of a buyer. There is no direct communication between the buyer and the seller.
There are, however, high risks associated with the new set up, as there is a chance that a seller never acknowledges the payment.
Nischal Shetty, founder and CEO, WazirX, was quoted as saying, “If the seller says that he has not received the amount, then a dispute resolution mechanism kicks in where our teams hear out both the parties to resolve the issue.”
To keep a check, the transactions only between KYC-verified users are allowed by exchanges. There is also going to be a rating mechanism so that a person knows if there were default cases in the past.
While the crypto currency exchanges have given a mechanism, it is highly risky given no regulator is involved in the whole mechanism.