BHUBANESWAR: If you are an Indian investor and are perturbed by the Reserve Bank of India’s grace period to banks dealing with cryptocurrency entities set to end on July 6, market players give you a reason to cheer. There is still is a possibility of taking positions in the cryptocurrencies in India. How? This has to be done without making and receiving payments in the actual currency.
The Central bank does not allow customers to buy digital currencies from an international exchange paying in rupees. There is a possibility to trade crypto-to-crypto and not fiat (money)-to-crypto. This means you can indulge in the crypto-to-crypto trade that allows you to buy one cryptocurrency in exchange of the other. The current remittance regulations do not penalise trading between cryptocurrencies.
For first-time investors, the only option left is peer-to-peer transactions, a system that some exchanges are considering. In this, an exchange’s role is limited only to connecting the buyer and seller of cryptocurrencies, who then take the transaction offline without involving the firm.
“For instance, a customer can receive or spend cryptocurrency with a tap of the point-of-sale terminal which is connected to blockchain without the use of their mobile phones,” explained David Ben Kay, Chief Counsel at Pundi X, the cryptocurrency point-of-sale manufacturer.
“It takes less than 30 minutes for the transaction. We then liquidate the cryptocurrency into fiat in our own countries. However, for the ones who cannot receive crypto payment, we transact traditionally via bank transfers, which is a very tedious process wherein the banks double check on the source of payments,” Kay said.
Compared to fiat, cryptocurrency is transparent, traceable, and irreversible. But this mode would come with its own set of challenges. As these transactions take place between two individuals, trust remains a concern. “It works on the guarantee that you will get the cryptocurrency after giving cash. So, there are concerns about frauds or illegal transactions,” said Nischal Shetty, founder and CEO of WazirX, another Indian cryptocurrency exchange.
FINDING A WAY OUT
However, finding a way forward, Kay noted that all the cryptocurrency transactions are blockchain-based and this technology replaces the need for a third party involvement to provide trust for financial activities along with contracts and voting activities.
“If the government or the Central bank oversees this technology, this redundant process (using PoS terminals) could be replaced successfully by blockchain transactions wherein there is no trust issue as it is most secured and is peer-to-peer,” Kay said.
Two Indian crypto exchanges offer crypto-to-crypto trading — Zebpay and Koinex. The latter offers 23 trading pairs while the former offers one. Nonetheless, the crypto players feel that in the long run, proper regulations will help the local cryptocurrency market to grow.