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Indian Exchanges Continue to Flout Crypto Banking Ban

The Reserve Bank of India (RBI) banking ban on cryptocurrencies in India is having less impact than the government anticipated as more exchanges go back to work.

Three exchanges have announced the return of Indian rupee (INR) deposits, contrary to the government ruling in July, which effectively removed INR deposits and made withdrawals illegal. Petitions against the current ruling are up for Supreme Court scrutiny later next week. On 12 September, Koinex announced rupee deposits and withdrawals were now back in operation at their exchange, referring, rather romantically, to the “old times”:

“We are happy to announce the revival of INR in the crypto universe through a new peer-to-peer deposit and withdrawal mechanism for INR transactions… Just like the old times, users will be able to deposit and withdraw funds directly from their INR wallets.”

Another exchange, Coindelta, is back to business as usual too with an equally folksy announcement on their website:

“We have resumed back the INR deposits and withdrawals on Coindelta. Not only this, your old favorite INR markets are back where you can trade with your INR.”

Two other platforms, Koindesk and Giottus, are back too, the latter with a peer-to-peer (P2P) system, allowing its users to withdraw rupees. P2P has become a way that many exchanges have developed for their own homemade way of operating. Exchanges now using a P2P system for accessing and spending their rupees include WazirX, Intashift, and Coind.

WazirX head Nischal Shetty suggested that the exchange was seeing more that one match per minute through its P2P facility, with trading increasing daily, proving that crypto is very much alive and well on the subcontinent.

Rahul Chitale of Instashift said: “Since the last set of RBI-related developments in the past couple of months, we have continued to see strong 20-25% growth in trading volumes month on month over the last 2 quarters of our operation.”

In the meantime, Dabba growths in strength, profiting from the RBI ban. Working via the messaging app Telegram, with money as cash routed through the various channels in the hawala system. The money then passes either officially or unofficially to the foreign account where Bitcoins are transacted. Payment is then made in cash or check and the deal is done: no exchange, no Indian bank.

 

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India Considers Rupee-Backed Digital Currency to Combat Rising Fiat Cost

The Reserve Bank of India’s study to look at the feasibility of introducing a rupee-backed central bank digital currency was driven by the burden of current rising costs in printing paper fiat money.

The RBI suggests that there may be pressure put on other banks globally, particularly with the rise in interest in digital currencies for banking purposes. However, electronic fraud remains a concern, according to Financial Services company EY India. Company representative Manesh Makhia suggested, “The idea of a central bank-issued digital currency is very promising though issues around digital counterfeiting will need to be addressed.”

The Reserve Bank of India’s inter-departmental group, the first of its kind to look at digital currency in terms of banking, is all the more relevant given the recent RBI annual report findings released this week. It showed that 99.3% of the total demonetized money had been returned to the bank, leaving just over INR 100 billion (USD 141 million) in the market. The report noted:

“(Globally) the rising costs of managing fiat paper/metallic money, have led central banks around the world to explore the option of introducing fiat digital currencies.”

There are speculations that RBI may be considering a rupee-backed currency to overcome the exorbitant costs of printing paper money, although the bank’s interdepartmental group will also be looking at both blockchain and artificial intelligence and how these can be integrated into the banking system. A source suggested:

“As a regulator, the RBI also has to explore new emerging areas to check what can be adopted and what cannot. A central bank has to be on top to create regulations. This new unit is on an experimental basis and will evolve as time passes.”

It hasn’t been a happy few months in India for crypto traders though, who have been hit hard by RBI’s instructions earlier this year prohibiting financial institutions in India from providing cryptocurrency services, a ban which is currently being challenged in the country’s highest court.

Late last year, RBI announced it was looking into the possibility of a fiat cryptocurrency; the “Lakshmi coin”, named after the Hindu goddess of wealth and prosperity.

 

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P2P Becoming the Indian Way to Trade Crypto Following the Banking Ban

Peer to Peer (P2P) trading is on the march in India due to the country’s banks shutting down crypto services this year.

Since the Reserve Bank of India (RBI) decision earlier this year, Indian traders are adapting as only Indians can do, and are doing it with great success too, with homemade P2P platforms and exchange adaptations using P2P trading.

Peer-to-Peer trading cuts out the banks completely. Out of this move, a new service KoinLoop has launched such a service, born out of two collaborating exchanges; KoinEX and WazirX. The latter’s CEO argues that his company also has the cheapest BTC price in India, adding:

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

As Bitcoin News reported recently Dabba is also taking off as a way of avoiding the RBI ban. Best described as a way of trading through something called a “hawala” network rather any system connected with an exchange, Dabba is becoming increasingly popular. The trading only takes place through an overseas bank account mainly based in the UK, with Dubai another favorite.

Mainly using the messaging app Telegram its use best explained simply thus:

“The broker accepts money in cash, buys Bitcoins using an overseas trading account and sells them when the bet placed in India is settled. The difference is paid in cash to the customer.”

The KoinEX system offers a P2P trading solution called Loop which offers clients access to the trading of BTC, ETH, and XRP. CEO Rahul Raj explains:

“…buyers and sellers on Loop can create their own listings (like a marketplace) or explore existing listings to choose their best trades,” adding, “…while it’s still early days, Loop has been very well received by the Indian trading community and we are seeing increasing traction every day.”

LocalBitcoins have also seen a local boost to trading since the ban with the Indian rupee (INR) volume increasing 25% from around 68 million rupees to 85 million rupees to August. BTC saw a similar hike in trading volumes with a hike of 23% over the same period.

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“Dabba” Trading yet Another Way of Getting Around India’s Crypto Ban

Further maneuvers are afoot since the last Bitcoin News update about Indian traders circumventing the Reserve Bank of India (RBI) ban on cryptocurrency, and this one is very much a “Dabba Dabba Doo” moment.

One strategy that some exchanges are taking to sidestep the RBI is encouraging peer-to-peer trading, thereby cutting out the banks completely. Out of this move, a new service KoinLoop has launched such a service, born out of two collaborating exchanges: KoinEX and WazirX.

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

Now, they’ve come up with another way of trading in Bitcoin called “dabba” which has now taken off. Dabba can be best described as a way of trading through something called a “hawala” network rather any system connected with an exchange. The trading only takes place through an overseas bank account mainly based in the UK with Dubai another favorite.

Reports suggest that most of the hawala network traders are operating out of Ahmedabad, Surat, Rajkot, Kolkata and Mumbai working as a bridge between the customer and one of the trading companies overseas. Ahmedabad, Surat, Rajkot, Kolkata and Mumbai best described as thus:

“The broker accepts money in cash, buys Bitcoins using an overseas trading account and sells them when the bet placed in India is settled. The difference is paid in cash to the customer.”

It has been reported that most Dabba happens via the messaging app Telegram, with money as cash routed through the various channels in the hawala system. The money then passes either officially or unofficially to the foreign account where Bitcoins are transacted. Payment is then made in cash or check and the deal is done: no exchange, no Indian bank.

As mentioned in another Bitcoin News post, peer-to-peer (P2P) trading has also become a popular method given the current status quo, which may or may not change soon depending on which sources the information comes through. A few exchanges launching P2P trading services include KoinEX, WazirX, and Coindelta. A few others such as Giottus, Instashift, and Zecoex also offer some forms of P2P systems.

 

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Reserve Bank of India Clarifies Why It Targeted Crypto

The Reserve Bank of India has finally clarified its position on cryptocurrencies following this year’s crypto banking ban, writes Bitcoin.com.

The clarification has come due to a request by the Internet and Mobile Association of India (IAMAI) following that organization’s submission to India’s Supreme Court contesting the ban.

Apparently, the RBI’s response to the IAMAI won’t go on the public record but it has been reported that the details are primarily concerning illegal activities plus the validity of cryptocurrencies as units of value within the financial system, according to a source who claims to have seen the document.

The suggestion that the document has returned to the RBI’s original concerns regarding money laundering and investor protection has re-ignited anger and frustration among those affected by the banking ban. The central bank announced the ban in April, affecting around five million digital currency users in India.

Many exchange CEOs in India still maintain that the RBI actions were a knee-jerk reaction to a solvable problem. Nischal Shetty, Wazirx exchange chief argued, “Some of the arguments seem to be around investor protection… but investor protection comes with regulation and not a ban!”

The suggested that the response to IAMAI referred back to its original April statement regarding money laundering provoked a range of reactions from the industry including CEO of Belfrics Praveen Kumar who reportedly suggested that:

“By limiting transactions via bank accounts and allowing more cash-related transactions, RBI is allowing more people to get duped… Instead, they need to regulate the exchanges and lay down guidelines that can help prevent these frauds.”

The RBI had also condemned cryptocurrencies in December of 2017 for lacking intrinsic value and concern which was reportedly repeated in the latest response.

A recent statement by an Indian official has even suggested that the ban won’t hold. Talking to news source Quartz, a senior government official is reported to have suggested that the government is simply waiting to implement a “mechanism to be sure that the money used is not illegal money, and to track its source”, suggesting that rather than banning digital currency, the government simply wants to monitor the flow of cryptocurrency, adding that trading is “not a criminal offense”.

This stance seems to indicate that the ban on India’s exchanges dealing with financial institutions may be ready for another twist at some time in the future.

 

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India’s Exchanges Adapt Around Central Bank Crypto Business Ban

Despite the Indian Supreme Court’s decision not grant interim relief to those affected by the Reserve Bank of India’s (RBI) ban on banks’ dealings with crypto-related businesses, some exchanges are operating as normal, according to Coindesk.

RBI’s circular, directing all banks to end existing relationships with crypto exchanges and traders within three months, was due to take effect yesterday. The central bank’s blockade has resulted in several petitions going through the courts claiming that the RBI ruling was unconstitutional and should be stayed as a result.

Indian exchanges have reacted to the current status quo with varying degrees of compliance, with India’s largest exchange Zebpay agreeing to pause Indian rupee (IDR) deposits and withdrawal services until banks allow such transactions in the future. Despite this, the platform claims that its fiat-to-crypto and crypto-to-crypto trading services are still operating as normal, with a USD 5 million trading volume over the past day.

Zebpay CEO Ajeet Khurana Tweeted a promise to work things out:

Am very sad! But we will continue our relentless efforts to get things sorted. I am sure crypto is good for India. If we, as a nation, do not make up our mind, we will be caught on the wrong side of history and miss the crypto bus. And that will be a tragedy. https://t.co/f9fG1D5D5U

— Ajeet Khurana (@AjeetK) July 4, 2018

Other exchanges following suit and adhering to the Supreme Court’s decision, such as Coinome and Pexo, have said that they have temporarily suspended fiat deposit and withdrawal services.

However, some exchanges continue to operate the banned services without any legal ramifications, and some have found innovative ways to continue this particular aspect of trading in defiance of the Supreme Court. Bitbns is carrying on its rupee deposit and withdrawal service after today’s deadline, although it is not clear as yet what action the government will take. Another exchange, KoinOK, has taken the same stance.

One strategy that some exchanges are taking to sidestep the RBI is encouraging peer-to-peer trading, thereby cutting out the banks completely. Out of this move, a new service KoinLoop has launched such a service, born out of two collaborating exchanges; KoinEX and WazirX.

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

 

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India on the Back Foot over Crypto Ban as Central Bank Admits Lack of Research

The Reserve Bank of India (RBI), India’s central bank, has admitted that it did not undertake a thorough enough research of cryptocurrencies before issuing its ban earlier this year, writes Bitcoin.com.

This was the bank’s response to a Right to Information query filed by an Indian blockchain lawyer, which has since been distributed to news outlets.

All financial institutions were instructed to cease cryptocurrency business across the sub-continent on 5 April and were given three months to comply. The move, like others in various countries attempting to legislate cryptocurrency, was designed to prevent money laundering and to protect consumers. RBI gave banks and financial institutions notice that it would put a working party into place to look at the feasibility of issuing a state-backed cryptocurrency.

It appears that RBI did not study the nature, principles, and usage of cryptocurrencies before issuing the ban, and no committee was formed for this purpose prior to the ban. The ban has since been challenged in the Supreme Court, seeing some investors moving their business overseas.

The Supreme Court challenge was put in place partly due to a petition supporting blockchain that gained 17,000 signatures, largely driven by younger users employed in the industry, citing youth unemployment as a major concern.

The initial two writ petitions filed in public interest with the Supreme Court are still pending but will decide the legal status of cryptocurrencies in India. They are representative of the enormous public outcry against RBI’s dictum, as the population of India is both highly aware and active in the cryptocurrency market.

According to Kunal Barchha, co-founder and director of the company behind the upcoming crypto exchange Coinrecoil, the author of the query is Varun Sethi, an Indian blockchain lawyer.

Sethi’s questions to the RBI focused on why a body or panel of inquiry hadn’t been formed to investigate and research any extant cryptocurrency risks prior to the bank’s ban, and no foreign sources had been contacted to gain further information about the technology.

The bank’s response was that it “was a member of the Inter-Disciplinary Committee constituted by the Finance Ministry and the Indian government in March 2017, to examine the status of virtual currencies and suggest regulations”.

Although central banks do have authority to ban or restrict commercial banks from a certain industry when it is declared as completely illegal, this was not the case regarding the decision, said Barchha.

“In the case of Bitcoin or cryptocurrencies, that process is completely missing, as the government of India has not yet declared cryptocurrencies illegal and so we have challenged the RBI’s circular,” he explained.

 

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India Rich in Crypto Skills Despite Government Hard Line

A recent study in India by HR company Belong has revealed that over 5000 Indian software developers have the necessary skills to work on blockchain and cryptocurrency projects, reports Inside Bitcoins.

The study claims that out of an estimated two million software developers, 0.25% of them have the skills required for blockchain development and cryptocurrencies, such as data science, algorithms, and cryptography.

The Reserve Bank of India (RBI) recently mandated any financial institutions and banks that fall within its regulatory jurisdiction to terminate any association with individuals or businesses dealing with virtual currencies. Although the mandate will dissuade many crypto investors, there are still channels open for traders and investors to circumvent the system.

Despite this, there are still a number of companies looking to move into the cryptocurrency space. Belong co-founder Rishabh Kaul suggests that India does have the potential to train another 10,000 developers with prior fintech experience, although he suggests another 30,000 would still need extensive training or refining of current skills. The local cryptocurrency market has been rapidly growing, with investor numbers reaching 5m and bitcoin investments in India approaching $2bn.

Adversely, Market Mogul reported recently the difficulties that new and existing cryptocurrency companies may face, apart from lacking qualified staff, due to the government’s recent tough stance on virtual currency. Investors in India will no longer be able to go through established financial institutions to transfer money from their bank to a crypto wallet. This is seen by some as part of a move by the government to eliminate cryptocurrencies from the investment space altogether.

Cryptocurrency in India has had to endure government criticism from very early on. The country’s finance minister has warned that it can never become legal tender, and India’s Central Bank has continued to caution users, suggesting cryptocurrency’s price volatility can cause financial instability.

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Crypto Exchanges Challenge India’s Banking Restrictions in Supreme Court

Four more exchange platforms have challenged Reserve Bank of India’s (RBI) prohibition of facilitating Bitcoin and other digital currencies transactions.

This is the third and most significant challenge yet to the ban that has seen banking services to cryptocurrency exchanges entirely blocked off. The platforms that filed the case include Coindelta Exchange, Koinex ExchangeThroughbit Exchange and CoinDCX.

As reported by Mohammed Danish, a practising lawyer at the High Court of Delhi in India, the case has been filled as a Writ Petition (Civil) no. 373 of 2018 under Article 32 of the Constitution, challenging the constitutional validity of RBI’s case.

The new policies adversely affect the business interests of exchanges and start-ups; the first two Writ Petitions came from two such entities that are seeking to protect the right to carry on trade, and rights to equality that are guaranteed in the Indian Constitution.

The initial two Writ Petitions filed in public interest with the Supreme Court are still pending, but will decide the legal status of cryptocurrencies in India. They are representative of the enormous public outcry against RBI’s dictum, as the population of India is well known for being both highly aware and active in the cryptocurrency market. It was reported by Finance Magnets in January this year that India was responsible for 10% of all Bitcoin transactions worldwide.

All three of the Writ Petitions are likely to be heard in Court on 11 May 2018.

The initial restrictions to crypto services

Last month on 6 April, RBI officially directed regulated banks and payment platforms to no longer provide services to cryptocurrency operations, effective immediately. The reasoning from RBI behind this move cited digital currencies as ”[coming] with associated risks‘, following the restrictions from HDFC and Citibank both restricting clients from purchasing Bitcoin via their debit and credit cards.

The initial statement from RBI reads: ”Such services include maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer/receipt of money in accounts relating to purchase/ sale of VCs.”

 

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Pakistan Central Bank Curbs Crypto

Pakistan’s State Bank (SBP) has issued a statement which confirms that financial companies are now barred from working with cryptocurrency firms in the country.

The SBP website’s statement confirmed that all banks in Pakistan “are advised to refrain from processing, using, trading, holding, transferring value, promoting and investing in virtual currencies or tokens… any transaction in this regard shall immediately be reported to the Financial Monitoring Unit (FMU) as a suspicious transaction”.

Pakistan’s FMU sees its goals as developing a strong reporting culture amongst financial institutions, making a contribution towards fighting money laundering and terrorist financing. It also sees itself as a recognized model of financial intelligence gathering, analysis and dissemination in Pakistan.

In the wake of this announcement, there has already been an impact on the industry in Pakistan. Urdubit, an exchange which was first launched in 2014, has shut down. Users attempting to access the platform today will be greeted with a screen message, “Urdubit is Shutting Down”, warning its users to withdraw their funds “as quickly as possible” due to a “State Bank of Pakistan prohibition on dealing with virtual currencies”.

Rodrigo Souza, co-founder of BlinkTrade, the provider of Urdubit’s open source software, suggests that governments and banks will fight Bitcoin due to a potential run on the central bank.

The news of Pakistan’s curb on cryptocurrency trading comes just a day after India’s announcement on Thursday that The Reserve Bank of India (RBI) was now strictly prohibiting all banks and regulated financial entities in dealing with cryptocurrencies. On the news of India’s announcement, the price of Bitcoin plummeted to a low of 350,000 Pakistani Rupees  (USD 5,392) against its international market price of USD 6,617 according to cryptocurrency exchange Coinome.

Following yesterday’s ban the Pakistani government has indicated that those using cryptocurrencies to transfer funds outside Pakistan could be prosecuted. The SBP declared “no entity is currently licensed or authorized by SBP  to offer money remittance services and products in Pakistan using virtual currencies/coins/tokens”.

 

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