The Reserve Bank of India (RBI) decided, in a circular issued on April 6, that banks in the country will no longer be allowed to do business with crypto exchanges. The deadline, which expires on July 5, is forcing companies to prepare for the worst. Zebpay, one of the largest digital currency operators in India, has even asked its customers to withdraw their funds before the deadline ends.
Cryptocurrency Exchange Asks Users to Withdraw Funds as RBI Deadline Looms
As the RBI deadline looms, industry players within the crypto-space are drawing up contingency plans including moving overseas.
Others may soon be switching to over-the-counter (OTC) trading in order to bypass the ban over centralized cryptocurrency exchanges and potentially resulting in more Bitcoin trading in the country. In the future, we will see decentralized protocols take over and put the issue to rest.
As digital currency operators like Zebpay ask users to withdraw their funds, many traders on these exchanges are unwilling to liquidate their holdings just yet as they wait for the market to move up again. With the deadline set for July 5, there are not many alternatives. Zebpay has stated that, while the matter is being challenged in the court, it may be incapable of transferring funds back to its users after the deadline if banks discontinue the services.
“While our industry is challenging this legally, the outcome is beyond our control. Hence, if you are holding any rupees, or depositing any rupees in Zebpay, there could soon come a time when we may not be able to honour withdrawal requests. Please continue only if you understand this risk.”
Rupee deposits and withdrawals are at risk if the deadline goes through and banks shut down their services to cryptocurrency exchanges. “This can cause discontinuation of crypto trade based on rupees, or at least cause significant price movements,” said the company, who recommended users to make their withdrawal requests while banks still support them.
The rbi put forward a circular on April 6 that prohibited regulated financial entities from supporting risks associated with cryptocurrencies. The reasoning behind the central bank’s decision is that a large cryptocurrency ecosystem in India could endanger financial stability, according to RBI Deputy Governor BP Kanungo.
The threat centralized cryptocurrency exchanges face in India, however, is an opportunity for peer-to-peer operators. Given that neither the RBI nor the Indian government fully banned cryptocurrencies, decentralized exchanges, and peer-to-peer platforms are able to completely bypass the traditional financial system.
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