With ban looming, Cryptocurrencies take this evasive action to stay alive
The Reserve Bank of India (RBI) sword hanging over cryptocurrency exchanges is not likely to fall before July 6, but many of them have already escaped the slash by launching crypto-to-crypto trading on their bourses. On April 6, the apex bank had issued a circular to banks to stop all services to cryptocurrency exchanges within three months.
And as banks do this, it will bring to a halt fiat-to-crypto trading .
Crypto-to-crypto trading is where one cryptocurrency is used to buy another instead of using fiat currency, which would be the rupee in case of India.
Rahul Raj, co-founder and CEO, Koinex, who began launching his crypto corridors one month back, said the RBI order last month expedited the move which had been in the reckoning for some time.
“The reason crypto-to-crypto trading is making a lot of sense today is because fiat corridors are a bit of a question after the RBI directive. Our crypto corridors have 60 trading pairs* and we are the world’s first exchange to have a Ripple or XRP-based trading pairs,” Koinex’s Raj said.
In crypto-to-crypto trading, trading pairs are described as trade between one type of cryptocurrency and another.
For example, there could be trading pairs of Bitcoin (BTC) and Ethereum (ETH) and Ripple (XRP), etc.
According to him, the new mode of trading will help in maintaining continuity for traders in cryptocurrency market.
“It is a response to make sure that the cryptocurrency trading community in India does not suddenly face a roadblock or a complete blockade. It is being done so that they can continue the trading activity (in cryptocurrencies) and conserve the value of the assets in which they have put their capital in,” said Raj.
The virtual currency platform owner cautioned investors that cashing out could prove a challenge once the RBI directive comes into force.
“When you need to cash-out and you want your money back in fiat currency then you need a channel to do that. But with the current (RBI) directive it is impossible because they (RBI) have ring-fenced the entire virtual currency atmosphere and isolated from banking services (from us).
WazirX founder and CEO Nischal Shetty is also looking to start crypto corridors in a few weeks to provide safeguards for traders on his exchange.
And he wants to do it before RBI deadline expires so that traders get accustomed to it.
“It has to be before the deadline (July 6) so that users get accustomed to not trading in INR (rupee) pairs and get used to crypto pairs. Even from the user’s point of view, there will be a small mental shift in the way they look at things,” Shetty said.
In crypto-to-crypto trading, returns would not be calculated in INR, the value would on the basis of base crypto pairs.
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“Until now, people calculated their returns in the rupee. Once crypto-to-crypto trading starts, you’ll have to start thinking in base pairs that we have. They are usually BTC and ETH, which are used to buy some other tokens,” said Shetty.
He said after the RBI deadline, no exchanges will be able to give Indian fiat pairs.
“For that, you will have to go for OTC (over the counter) trading. Right now, our investors are protected because we take custody of the INR and make sure that INR reached them from other buyers but after the RBI comes into force, there wouldn’t be anyone who will take custody and guarantee investors that once he gives his coin to someone, he will get the money,” warned Shetty.
The WazirX founder believes that the new generation investors and traders in India were very comfortable with cryptocurrencies as compared to traditional stocks. And so, crypto-to-crypto trading would do well in India.
“You don’t expect new-age entrepreneurs to get into traditional investments, which gives far lesser returns compared to cryptocurrencies. Most of these people have moved from stock trading to cryptocurrencies. Some of them (very young) have never traded before in their life and they have a natural affinity to cryptocurrencies. This is very similar to how people don’t think of posting letters today. That’s the kind of crowd we are talking about. Expecting them to go back to the traditional route is not going to happen,” he said.
However, he believes that crypto-to-crypto trading is a little premature in India. “To be honest, it would have been ideal for a couple of years from now. More and more Indians would have been part of this. If you compare the Indian market with global, we are not even one percent of it. But people have no choice but to go to crypto-to-crypto trading,” he said.
Shetty said a large part of the trading in virtual money today is done in crypto pairs.
Gurgaon-based Alluma, founder and CEO, Akash Aggarwal, revealed that around 90 countries from around the world have either come out with a positive regulation or are in the process of coming out with one.
He said that India, being a democratic country, can challenge the RBI directive and could eventually have the regulatory framework for the cryptocurrencies.
“If you can look at other democratic countries such as Israel, a similar thing happened and exchanges went to the Supreme Court. The apex court passed a judgment in favour of exchanges. The same thing happened in Chilli too,” said Aggarwal.
The Alluma founder is waiting for some clarity on the issue and will then take a call on launching a crypto-to-crypto corridor on his exchange soon.
“If there is some uncertainty in the Indian market, then we will go ahead with crypto-to-crypto trading launch first and once it is more clear in the light of the judgment we will go ahead with fiat on-boarding,” he said.
By Praveena Sharma, DNA Money