Paytm Payments Bank Ltd (PPBL), the only mobile-first bank in India, has announced that it will no longer support crypto exchanges. The bank, which has been offering its services to crypto exchanges, abruptly ended its support without giving any reasons.
Numerous banks in India have ended their support for crypto exchanges in the past few days. They did so after the Reserve Bank of India (RBI) issued an unofficial notice to all banks in the nation. According to a report by India’s Economic Times, a source from PPBL had informed them that the bank would cease all association with crypto exchanges from May 21, 2021.
How Competitors Have Reacted To The RBI Notice
PPBL is PayPal’s main competitor in India. The decision to end crypto payments will no doubt affect their competitive edge. PayPal and other major payment processors currently allow the purchase and sale of crypto. However, all of these international firms will also likely bar Indians from using their crypto services.
The Economic Times report also noted that numerous crypto exchanges in India such as BuyUCoin, and WazirX, had received notices from banks, informing them that they intended to cut ties with them. However, PPBL has not given any reason to crypto exchanges for their action.
RBI Is Cracking Down On Crypto
Various news outlets in India have reported that RBI had sent a notice to payment processors in the nation to end all ties with crypto exchanges. Banks that have adhered to the notice by the RBI have unceremoniously ended their ties with exchanges without any reason.
Crypto Market Fluctuation May Have Been The Catalyst
The decision by the RBI to crack down on crypto may be explained by the recent market fluctuations experienced in the crypto market. China was the first to crack down on crypto trading recently. After witnessing the market upheaval of the past few days, Chinese authorities ordered banks in the nation to end all relationships with crypto-related entities. It is the toughest action taken by China since its December 2017 crackdown on crypto trading.
In the past few weeks, Bitcoin has experienced major fluctuations and it hit a three-month low on May 17, 2021. The fluctuations were caused by tweets from Elon Musk, who revealed that Tesla may dump its massive BTC holdings. Shortly after, China cracked down on crypto trading, which caused the market to fluctuate even more.
India And Crypto
India has had a tumultuous relationship with crypto. At some point, lawmakers in the country contemplated creating a law to make it illegal to own or process crypto payments. The Reserve Bank of India issued an official notice to all banks barring them from trading in crypto. However, the decision was challenged in India’s Supreme Court and RBI lost.
However, it has not stopped the RBI from looking for various legal avenues via which to stymie crypto trading in the nation. India’s authorities view crypto as a threat to the nation’s monetary system. Besides that, there are fears it might be used to finance error activity and money laundering.
How India Exchanges Are Coping
To cope with the latest regulatory hurdles, crypto exchanges have become creative. Some have established relationships with payment processors outside India while others have created specialized wallets for their users. In some instances, crypto exchanges have come up with ‘offline’ systems, which allow users to access their crypto assets. Despite all these creative solutions, crypto exchanges in India will feel the bite, which will result in lower trading volumes.
India exchanges like WazirX do not seem to be fazed by the recent developments. According to Nischal Shetty, the CEO & Founder of WazirX, they will continue to evolve. In a recent Twitter post, Nichal stated that:
“Don’t worry. WazirX has always been here for the crypto ecosystem. Our team is building multiple options. We’ll not rest, we’ll not stop till we ensure everyone in India is able to participate in Crypto”
Don’t worry. WazirX has always been here for the crypto ecosystem.
Our team is building multiple options. We’ll not rest, we’ll not stop till we ensure everyone in India is able to participate in Crypto
— Nischal (WazirX) ⚡️ (@NischalShetty) May 21, 2021
Top exchanges like WazirX are already searching for alternative solutions to ensure their crypto ecosystem continues to evolve during these difficult times.
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