To meet the country’s growing demand for digital assets, India’s crypto business is continuously looking for ways to skirt government and banking limitations.
A number of Indian bitcoin exchanges are facilitating peer-to-peer transactions as part of an ongoing push to circumvent bank and payment company limitations.
When the exchange gets a buy order, it connects the buyer and seller directly. The buyer can then transfer funds to the seller via a bank or payment platform, who will transfer the cryptocurrency in their exchange wallet to the buyer’s wallet.
There are no transfers to the exchange from payment systems or banks in this manner.
Blockade of Indian cryptocurrency payments
According to local media sources on April 18, the move is in response to recent restrictions imposed on payment networks in India. According to an unidentified executive at one of the exchanges, the outlet:
“This is not how an exchange should be functioning. It’s certainly less efficient. But apparently there is no violation of any regulation or law. It’s a simple money transfer from A to B,”
Third-party payment processors are typically the on-ramps and off-ramps for fiat between the client and the exchange. The Reserve Bank of India, on the other hand, has issued a number of warnings to them regarding payments to cryptocurrency exchanges.
Due to pressure from the central bank, Coinbase was forced to suspend its payments partner just a few days after it began in India. The exchange intended to launch with the popular Unified Payments Interface (UPI) service, but state financial regulators halted that proposal, citing that they were unaware of any exchange using UPI.
CoinSwitch Kuber, an Indian exchange, likewise banned crypto deposits and withdrawals via its payments network last week.
As banks strengthen their grip on digital assets, this has left Indians with less options for exchanging fiat payments.
Getting around the bankers
Some exchanges have turned to alternative payment methods, such as receiving monies directly from customers in their bank accounts. When a deposit is made, the exchange credits the user’s crypto wallet, allowing them to purchase digital assets.
According to a lawyer, this strategy could also be problematic for exchanges:
“If it’s perceived that by directly accepting funds from buyers, an exchange is offering some kind of a wallet facility to the trader, there would be regulatory issues,”
Investors and traders are already moving funds offshore to utilize on foreign markets; nevertheless, there are constraints imposed by India’s overbearing banking sector, necessitating additional circumvention.