Cryptocurrency Banking Ban Continues In India, Major Exchanges Drop Fiat Support

In a court ruling on Tuesday, July 3, the Supreme Court of India has refused to grant any concession into the central bank’s ban of banking services to the local cryptocurrency exchanges. Earlier this year in the beginning of April 2018, the country’s central bank - Reserve Bank of India - issued a circular asking all banks to cutoff their ties with cryptocurrency exchanges.

The local cryptocurrency community comprising of crypto enthusiasts and investors refuted the RBI’s stand by taking this matter to India’s highest judicial authority, the Supreme Court . Moreover, several petitions were also filed in the local courts of several cities in India.

As reported by Quartz , “The supreme court of India will not be telling the Reserve Bank of India to relent in its decision to keep banks free of cryptocurrency.”

Rashmi Deshpande, associate partner at Khaitan & Co, a law firm representing Kali Digital Eco-Systems, an Indian exchange planning to begin operations later this year said that “This a win for the RBI and a big blow to virtual currency exchanges and traders. In our earlier request to the RBI as well, we had asked it to extend the deadline by a month after the July 20 hearing.”

Deshpande further added that “However, now that the ban will continue, the banking route for the exchanges and its users will be completely choked.”

Although the date of the hearing is set to be ahead this month, there is some skepticism that is brewing in the country’s cryptocurrency market after some positive comments coming from the central government officials. The secretary of India’s Department of Economic Affairs Subash Chandra Garg recently confirmed that the Narendra Modi government is currently in its final stage of setting up a draft for regulating the cryptocurrency market while deciding on a proper framework and policy of its working.

While talking to local new channel ET Now, Mr Garg said that “We are fairly close to developing a template [for crypto regulations] that we think is in the best interests of the country. We have prepared a draft (on virtual currencies) that entails what parts of this businesses should be banned and what should be preserved. This should be discussed by the first week of July and we should wrap this up within in the first fortnight of July.”

Amidst the continuing ban, cryptocurrency exchanges in India have now considered completely dropping the fiat support on exchange while allowing only peer-to-peer or crypto-to-crypto transfer services.

WazirX, a cryptocurrency exchanges based out of Mumbai has opted for peer-to-peer transfers where the exchange will act as an escrow account between buyers and sellers. This is like the seller deposits cryptocurrency with WazirX, the buyer pays the seller in fiat, and then WazirX released the cryptocurrency to the buyer.

WazirX CEO Nischal Shetty said: “If banking is something the exchanges are not allowed to do, then the solution is something that direct banking doesn’t come in.”