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 struggling to open accounts with financial institutions. Although there is no crypto ban in India, banks are reportedly acting on the advice of the Reserve Bank of India (RBI) to avoid exchanging cryptocurrencies.
Back in May, the RBI clarified its position on this issue and stated that there was no ban on banks from operating crypto exchanges. In fact, India’s Supreme Court overturned an earlier RBI rule that prevented banks from offering account services to crypto trading platforms.
The lack of access to banking services leads to significant disruptions such as limiting the scope of immediate settlement of withdrawals.
Given the reluctance of banks, crypto exchanges in India are starting to consider alternative payment providers. Working with payment processing firms is becoming a suitable bridging measure for platforms that wish to continue offering crypto / fiat trading pairs.
Smaller payment channels like Mumbai-based Airpay reportedly offer instant transfer services for exchanges like Coinswitch and WazirX owned by Binance. However, given India’s estimated 15 million cryptocurrency investors, such payment channels could prove inadequate.
To deal with the situation, large platforms like WazirX will have to stop crypto / fiat trading on certain days when only peer-to-peer (P2P) transactions are available. Some other exchanges are reportedly using manual settlement for bank deposits and withdrawals.
Those involved in the crypto exchange say reliance on P2P channels and other alternative trading methods can expose users to fraudulent actors.
Connected: Proposed cryptocurrency ban legislation reportedly under review by the Government of India
In the absence of a regulatory framework for cryptocurrencies in India, exchanges in the country are likely to continue to experience such struggles. As Cointelegraph previously reported, the government is currently weighing its options regarding the best approach to regulating the crypto market.
Meanwhile, RBI remains firm on its anti-crypto stance, even if reports suggest that government agencies are moving towards nuanced regulation rather than an outright crypto ban.