Commercial banks in India are reportedly reluctant to do business with crypto exchanges in the country.
According to Reuters on Thursday, crypto trading platforms in India are still finding it difficult to open accounts with financial institutions. While there is no crypto ban in India, banks are reportedly acting on the advice of the Reserve Bank of India (RBI) to shun cryptocurrency exchanges.
Back in May, the RBI clarified its position on the matter, stating that there was no prohibition against banks servicing crypto exchanges. Indeed, India’s Supreme Court overturned a previous RBI rule that prevented banks from offering account services to crypto trading platforms.
Lack of access to banking services causes major disruptions such as limiting the scope of instant settlements for withdrawals.
With banks remaining reticent, crypto exchanges in India are beginning to consider alternative payment providers. Collaborating with payment processing firms is becoming a suitable stop-gap measure for platforms looking to continue offering crypto/fiat trading pairs.
Smaller payment rails like the Mumbai-based Airpay are reportedly providing instant transfer services for exchanges like Coinswitch and Binance-owned WazirX. However, given India’s estimated 15 million cryptocurrency investors, such payment channels may likely prove inadequate.
To manage the situation, major platforms like WazirX are having to halt crypto/fiat trading on certain days with only peer-to-peer (P2P) transactions available. Some other exchanges are reportedly resorting to manual settlements for bank deposits and withdrawals.
Crypto exchange stakeholders say reliance on P2P channels and other alternative trading methods may expose users to fraudulent actors.
In the absence of a regulatory framework for cryptocurrencies in India, exchanges in the country may likely continue to experience such struggles. As previously reported by Cointelegraph, the government is currently weighing its options regarding the best approach to regulating the crypto market.