MUMBAI: Indian cryptocurrency exchanges are making efforts to secure viable, permanent payment solutions to ensure seamless transactions after banks and payment gateways begin disconnecting, six industry insiders said.
Exchanges are struggling to cope with this after the central bank, Reserve Bank of India (RBI), which has declared it does not favor digital currencies, informally asked banks to stay out of it over concerns about their impact on financial stability .
Customer complaints have flooded all of India’s major stock exchanges as the withdrawal of major payment gateways has affected transactions, according to social media and users.
“Banks are reluctant to do business,” said Avinash Shekhar, a co-head of ZebPay, one of India’s oldest crypto exchanges that does not offer instant settlement.
“We have spoken to several payment partners, but progress has been slow.”
Options being used include tying into smaller payment gateways, building your own payment processors, withholding instant settlements, or only offering peer-to-peer transactions, the heads of five crypto exchanges said.
At least two exchanges have teamed up with the smaller payment processing company Airpay after its larger competitors cut ties.
There is no official data, but India has nearly 15 million crypto investors holding more than 100 billion rupees ($ 1.34 billion) according to industry estimates.
Some crypto exchanges like WazirX are forced to stick to only peer-to-peer transactions on certain days, while others like Vauld allow manual processing of bank transfers while looking for a payment processor and securing the settlements.
Even large payment gateways like Razorpay, PayU and BillDesk have severed their connections as they too depend on banks to process transactions and the withdrawal of large banks has shaken them.
The three payment processors did not respond to a request for comment.
Some others, like Coinswitch and WazirX, have signed up for instant transfers with a smaller payment processor in Mumbai, Airpay.
The payment portal is supported by venture capital fund Kalaari Capital and billionaire equity investor Rakesh Jhunjhunwala, who has spoken out loudly against cryptocurrencies.
Jhunjhunwala did not immediately respond to an email requesting a comment.
Smaller payment gateways have not proven very successful in executing high volumes of transactions, resulting in outages that have led to a flurry of user complaints.
The lack of support from the banks is causing smaller companies as well as larger counterparts to withdraw from crypto activities.
“The partnership with the smaller payment processors has not yet proven to be stable and is more of a temporary solution,” said the founder of an Indian crypto exchange, who spoke on condition of anonymity.
Others, like Bitbns, have developed their own basic payment processor that allows for some essential transactions as the systems do not require prior approval from the Reserve Bank of India, the central bank.
“These are just stopgap solutions and not a solution to the problem the industry is facing,” said Gaurav Dahake, CEO of domestic exchange Bitbns.
The ban doesn’t have good omens as it has forced customers to opt for peer-to-peer (P2P) transactions, which allow buyers and sellers to interact directly.
“Alternative transaction methods such as P2P have predictably increased, which makes the market more inefficient and also exposes customers to the risk of fraud,” said the managing director of another crypto exchange.
($ 1 = 74.3650 Indian Rupees)