The Reserve Bank of India's (RBI) deadline to banks to stop any relationship with cryptocurrency exchanges expires on Thursday. For many, who tried to make a fortune by trading in cryptocurrencies, this is what the development will mean:
No Fiat: Till now, one could buy or sell cryptocurrencies such as bitcoin on exchanges. The process involved transferring money to a bank account linked to the exchange and getting the equivalent number of bitcoins. Starting today, that won't be possible. Some exchanges will become peer-to-peer (P2P)—it connects you with a fellow trader, with whom you can buy or sell bitcoins. P2P trading, as of now, will only let you trade bitcoin for another crypto, say litecoin, and not fiat.
Black Market: Holders of bitcoin will have to approach buyers on marketplace exchanges—think of OLX—or black market to convert crypto to rupee or any other fiat.
No Loans: Exchanges or cryptocurrency companies will now not be issued loans by banks, or even be allowed to hold a corporate account.
Rookie’s Burden: The circular will hit new bitcoin traders harder than experienced ones. Anyone wanting to be a bitcoin investor in India will now have to buy from peers and not exchanges, presumably after paying a premium over the current exchange rate—1 bitcoin trades for over Rs 4,30,000.
Depleting Wallet: Bitcoin firms such as Zebpay lets one store rupee value in wallets—much like regular online wallets. This money, if not already withdrawn or converted, could get stuck.
Yet, this not the death of cryptocurrency in India. RBI has only banned banks from associating with cryptocurrency, not cryptocurrency itself.
Exchanges could provide alternatives such as buying bitcoin for dollars through Paypal. This would, however, push the cost higher as one would have to pay a charge on Paypal to transfer the dollar amount to your bank.