Rise of P2P cryptocurrency platforms in India and ineffectiveness of the RBI ban

Kiran Vaidya
Sep 7, 2018 · 6 min read

Problem

RBI first issued warning bell against cryptocurrencies (referred to as virtual or decentralized digital currencies) back in Dec’ 2013 . This was way before most regulators in other prominent countries had yet to issue an official stance on cryptocurrencies. The circular outlines 5 major risks. Since that time RBI has been closely following the growth of cryptocurrencies in India and issuing warnings.

In Dec, 2017 the finance minister of India announced that “Bitcoin is NOT a legal tender”. This led to massive confusion amongst the general populace. Finally in Apr 2018 in 2 separate circulars (Link 1 | Link 2) the Govt announced that -

Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs. Regulated entities which already provide such services shall exit the relationship within 3 months.”

As expected by the close of the 3 months deadline all regulated and legit cryptocurrency exchanges stopped deposit and withdraw of INR

Even today many investors have their cryptocurrency on the exchange and it is stuck and they cannot convert it to fiat currency

Current situation

List of prominent cryptocurrency exchanges in India

Unocoin Approach

Unocoin is one of the earliest and biggest cryptocurrency exchange in India. Unocoin created 2 separate business entities — Unocoin (existing one) and Unodax. Unocoin is primarily as of now as a BTC and ETH wallet. They have enabled many services like bill payments and movie ticket purchase using Bitcoin. So the merchant always receives fiat payment and the buyer uses cryptocurrency to buy. Unocoin works like a brokerage converting BTC to INR and then using that INR for payment. Unodex is their altcoin exchange something similar to Poloneix with no fiat support and multiple tokens listed. They also support 1 stable coin (TrueUSD). However Unocoin, as of today, does NOT have any solution to fiat funding and withdrawal. Zebpay is suffering the same fate.

Screenshot of CoinDelta

Rise of P2P Platforms (mostly by existing exchanges)

There is absolutely no ban nor it is deemed illegal in any way to hold cryptocurrency or buy directly with fiat. The rise of P2P platforms was obvious.

Other Considerations and Business opportunities

Indian consumer still perceives Bitcoin as a high risk trading commodity

Indian cryptocurrency consumer mindset

Volumes increased and then just dropping in the recent past since announcement of ban from RBI. Source: Localbitcoins India Volume

Few additional points

RBI trying to control cryptocurrency trading in India :)

Conclusion

What happens if cryptocurrencies are banned in India

Further reading

2 bodies working with Govt and advocating positive regulations

Abbreviations

All Things Ledger

Guide to Bitcoin, Blockchain, Distributed Ledgers, and everything related to crypto-tech

Kiran Vaidya

Written by

Blockchain Consultant & Educator ¦ Completed RTW spanning 6 continents,35 countries on Indian passport with wifey ¦ Netflix serial killer

All Things Ledger

Guide to Bitcoin, Blockchain, Distributed Ledgers, and everything related to crypto-tech

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade