On April 6th, 2018, the Reserve Bank of India (RBI) announced that within three months entities registered with them should stop dealing with cryptocurrencies or companies that deal with cryptocurrencies.
This includes banks, mobile wallets, and domestic payment gateways. It was the first time the any government entity announced a rule that would affect cryptocurrency trading in India. There was no ban on trading Cryptocurrencies. Instead, not letting banks provide their services to exchanges heavily handicaps them because they will no longer be able to process fiat payments.
To prevent a complete shutdown of trading, Cryptocurrency exchanges have been rampantly adding crypto-to-crypto trading pairs which never existed a few months ago.
Just last week, Zebpay, India’s largest Cryptocurrency exchange announced six new crypto-to-crypto trading pairs. These include Ethereum, Bitcoin cash, and Ripple against BTC. Another popular exchange, Unocoin announced a new app where users would be able to trade popular cryptocurrencies against other cryptocurrencies.
Speaking with the Economic Times, Ajeet Khurana, the CEO of Zebpay said “Even if there was no RBI circular, the crypto to crypto product would have happened. However, because of the circular and the fact that fiats may no longer be in the picture, it definitely did hurry up and encourage the solution sooner.”
It is estimated that India has over 5 Million active traders and this is only set to increase. As the government clamps down fiat trades, traders have moved to over the counter solutions like LocalBitcoin. Though India has a large number of traders, it makes up less than 1% of daily volume.
Both traders and exchanges are not happy with RBI’s decision. Four different exchanges (Coindelta, Koinex, ThroughBit, and CoinDCX) have moved to the Supreme Court against the RBI. Another exchange, CoinRecoil has moved to the Delhi High Court, accusing RBI of violating the Constitution through the ban. The court has admitted this case and a notice has been issued to the RBI for a hearing on May 24th, 2018.