Crypto Exchanges in India Utilize P2P to Skirt payment channel restrictions
India’s crypto sector is continuously looking for methods to bypass government and banking regulations in order to meet the country’s growing demand for digital assets.
Numerous Indian bitcoin exchanges are supporting peer-to-peer transactions as part of a broader push to circumvent bank and payment company limitations.
When the exchange gets a purchase order, it connects the buyer directly to the seller. The buyer may then send funds to the seller through a bank or payment provider, who will then transfer the cryptocurrency from their exchange wallet to the buyer’s wallet.
In this manner, no funds are sent to the exchange from payment systems or banks. According to local media sources on April 18, the move is in reaction to recent limitations on payment systems in India. According to an unidentified executive at one of the exchanges,
“This is not the way an exchange should operate. It is undoubtedly less efficient. However, there seems to be no infringement of any rule or legislation. It’s a straightforward money transfer from point A to point B.”
Third-party payment processors are often the gateways for fiat transactions between the customer and the exchange. The Reserve Bank of India, on the other hand, has issued a series of warnings to them for overpayments to cryptocurrency exchanges.
Coinbase was forced to stop its payments partner in India only days after it began owing to pressure from the government bank. The exchange intended to launch using the widely used Unified Payments Interface (UPI) technology, but state financial officials put a stop to that, noting that they were unaware of any exchange that used UPI.
CoinSwitch Kuber, an Indian exchange, also suspended crypto deposits and withdrawals through its payments network last week. This has left Indians with fewer fiat payment choices as banks tighten their hold on digital assets.
Getting around the bankers
Certain exchanges have shifted to other payment methods, collecting monies directly from consumers in their bank accounts. Following the deposit, the exchange credits the user’s crypto wallet, allowing them to purchase digital assets.
According to a lawyer, this strategy may potentially be problematic for exchanges: “If it is believed that an exchange is supplying a wallet option to traders by directly collecting money from purchasers, there would be regulatory difficulties,”
Investors and dealers have already begun to transfer cash outside for usage on foreign markets; nevertheless, India’s overreaching banking system imposes further limitations, necessitating further circumvention.