Indian crypto exchanges crumble as banks cut ties after RBI frown

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MUMBAI, July 1 (Reuters) – Indian cryptocurrency exchanges scramble to secure viable and permanent payment solutions to ensure seamless transactions after banks and payment gateways start severing ties with them, six industry insiders said.

The exchanges are struggling to cope after the central bank, the Reserve Bank of India (RBI), which said it did not favor digital currencies for fear of their impact on financial stability, asked in a manner informal banks to stay away.

Customer complaints have flooded all key exchanges in India as the removal of major payment gateways affected transactions, according to social media and users.

Banks are reluctant to do business, said Avinash Shekhar, co-managing director of ZebPay, one of India’s oldest crypto exchanges that does not offer immediate settlement.

We have spoken with several payment partners, but progress has been slow.

Options used include connecting with smaller payment gateways, creating their own payment processors, suspending immediate settlements, or offering only peer-to-peer transactions, the heads of five crypto exchanges said.

At least two exchanges have linked with a smaller payment processor, Airpay, as its larger counterparts severed ties.

There is no official data, but India has nearly 15 million crypto investors, who hold more than 100 billion rupees ($ 1.34 billion), according to industry estimates.

THE ALTERNATIVE

Some crypto exchanges, such as WazirX, are forced to stick only to peer-to-peer transactions on certain days, while others, such as Vauld, allow bank transfers with manual settlement when looking for a credit processor. payment, safeguarding regulations.

Even major payment gateways, such as Razorpay, PayU, and BillDesk, have broken ties, as they too depend on banks to process transactions and the big banks’ withdrawal left them in shock.

The three payment processors did not respond to a request for comment.

Others, like Coinswitch and WazirX, have signed up with a smaller Mumbai payment processor, Airpay, for instant transfers.

The payment gateway is backed by venture capital fund Kalaari Capital and billionaire equity investor Rakesh Jhunjhunwala, who has voiced his opposition to cryptocurrencies.

Jhunjhunwala did not immediately respond to an email seeking comment.

Smaller payment gateways have not proven to be very efficient at executing high volumes of transactions, leading to failures that have led to a flood of user complaints.

The lack of bank support means that smaller companies, like their larger counterparts, are also pulling out of crypto business.

The partnership with the smaller payment processors has not yet appeared stable and is rather a temporary solution, said the founder of an Indian crypto exchange, who requested anonymity.

Others, like Bitbns, have built their own basic payment processor, enabling some essential transactions as the systems do not require prior approval from the Reserve Bank of India, the central bank.

These are only interim arrangements and not a solution to the problem facing the industry, said Gaurav Dahake, managing director of the national exchange Bitbns.

The ban did not bode well, as it forced customers to opt for peer-to-peer (P2P) transactions that allow buyers and sellers to engage directly.

As might be expected, alternative transaction methods such as P2P have increased, making the market more inefficient and also exposing customers to the risk of fraud, said the managing director of another crypto exchange. ($ 1 = 74.3650 Indian rupees) (Reporting by Nupur Anand; Editing by Clarence Fernandez)

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