Indian Crypto exchanges supporting P2P transactions to bypass restrictions imposed by banks and payment companies
local media reports on the 18th of April, Indian crypto exchanges payments
platforms facilitate peer-to-peer (P2P) transactions. This move will enable crypto
exchanges to bypass any restriction imposed by banks and payment companies
regarding transfers between payments platforms or banks to the exchange thereby
serving the increasing demand for digital assets in the country.
This move was taken following the statement issued recently by the National Payments Commission of India (NPCI) regarding the usage of the Unified Payments Interface (UPI) payments system in crypto exchanges led.
In a P2P transaction, once the exchange receives a purchase order from a buyer, the system will link the buyer with the seller directly by sharing the seller’s bank account details with the buyer. The buyer then directly can transfer payment funds using a bank or payments platform to the seller. The seller in return transfers the cryptocurrency in their exchange wallet to the buyer's wallet. This way transfers between payments platforms or banks to the exchange can be avoided.
Reserve Bank of India (RBI) in order to support reservations on these virtual digital assets issued a number of warnings regarding payments to crypto exchanges. Third-party payment processors act as the fiat entry and exit points between the exchange and the client.
According to local media reports on the 18th of April, this move came in response to recent restrictions placed upon payments platforms in India. An anonymous official at one of the exchanges said “This is not how an exchange should be functioning. It’s certainly less efficient. But apparently there is no violation of any regulation or law. It’s a simple money transfer from A to B,”.
Coinbase soon after its launch in India, had to face restrictions from the central bank. It was forced to suspend its payments partner due to pressure and was among the first to suspend UPI. Although the exchange intended to use the popular Unified Payments Interface (UPI) service, state financial regulators blocked that, saying that they did not know of any exchanges using UPI.
Indian exchange CoinSwitch Kuber also shut down crypto deposits and withdrawals through the payments network on its platform in the last week. Some crypto exchanges have accepted a different method where the client makes a bank transfer directly to the company's bank accounts. After receiving the fund exchange adds credit to the client's wallet. Although in this approach regulatory approval may be needed. Some Indian crypto investors also began moving towards exchanges outside.
There are some exchanges that receive customer funds directly in their bank accounts, rather than using different payment methods. As soon as the deposit is made, the exchange credits the user's crypto wallet, allowing them to buy digital assets. Already Indian traders and investors are shifting funds abroad through banks consider moving money abroad to buy cryptocurrencies and use on international exchanges, although banking restrictions on violation of exchange control regulations limit this.
CBW - External Analyst