The cryptocurrency ban in India has been looming large on the crypto investors for long now. RBI has issued multiple notices and several appeals to the investors in India about the unsafe nature of the investments in the cryptocurrencies. However, 3 months back, RBI took a more serious stand on this and issued a notice to all financial institutions to stop supporting any exchange of crypto to Indian Rupees within the next 3 months. Here is how the crypto exchanges and investors are responding to this ban which has come into effect on 5th July 2018
RBI Warning to Crypto Investors
The Central Bank of India (RBI) has not been in the favor of cryptocurrencies since inception, the reason for the same has not yet been detailed out. Initially, RBI warned the investors about the extremely volatile nature of the asset and associated investment risks. The anonymity that the crypto assets provided, where the transacting counterparties do not know each other was something both the Central Bank and the Government were concerned about. According to them, crypto assets were being used, illicitly for money laundering, smuggling etc.
How are Crypto Exchanges Dealing with the Ban?
Now, with the cryptocurrency ban in place, the startups and enterprises in this space have to overcome another hurdle in addition to a lot of regulatory compliance issues already in place to be able to sustain their business in India. Worst affected with this move by RBI is the crypto exchanges operating out of India. Zebpay, one of the biggest crypto-exchange operating in India saw it coming and have already moved out their operations to Singapore.
Even though the Supreme Court supported RBI’s decision, the cryptocurrency industry in India is not dead yet. Although the investors can no longer deposit or withdraw INR however, they can trade in crypto to crypto. Some of the exchanges like Zebpay and Koinex have already moved to peer-to-peer (P2P) transfer model. Here the P2P exchange is one of the ways to exchange your cryptocurrencies for fiat payments. You will have to lock your holdings in the exchange and then wait for a potential buyer who wants to buy your holding or a part of it. Once the seller confirms the payment the buyer will then get the cryptocurrencies
What should the investors do with their crypto portfolios?
Here are some of the safer alternatives for your investment
The P2P exchanges will facilitate you with fiat payment and withdrawal without transacting with the banks or any financial institution. LocalBitcoin is one of the trusted P2P exchanges facilitating fiat transfers for cryptocurrencies
If you don’t worry about your portfolio’s liquidity. You can hold the cryptocurrencies. Although holding of cryptocurrencies in India is not banned for now, however if you wish to liquidate your investment in the near future it would be difficult to do so and the only way you could do that is through an Over the Counter (OTC) trade with another person who wishes to purchase your crypto assets for INR.
Stable coins are something that provides the crypto-industry with some liquidity. Tether which is pegged by USD is a stable coin and its value hovers around $1. Another stable coin PetroDollar, which is a Venezuelan cryptocurrency, is pegged to diamonds and petrol mines of Venezuela. 1 unit of PetroDollar is pegged by $1 worth of the Petro contract.
The Road Ahead
As long as the cryptocurrency exchanges are still operating in India, there is hope. Even if the government completely bans operations of these exchanges in India, they will do it with a prior notice, ensuring that the investors are not harmed in any way.
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