Despite the Reserve Bank of India barring all regulated entities from carrying out cryptocurrency transactions, the exchanges are not deterred by the ban. They are in fact devising innovative ways of continuing the virtual currency trade. In April, the RBI issued a directive to all banks to refrain from dealing with businesses and individuals dealing in virtual currencies till July 5th.
However, two cryptocurrency exchanges, Koinex Loop and Wazir X are working on a peer to peer (P2P) model. This model will facilitate the virtual currency trade without having to use normal banking channels. Based on escrow, these two exchanges are ready to launch a P2P service. A contractual agreement, wherein a third party holds the financial instruments on behalf of two primary transacting parties, is known as escrow.
As per the P2P system, an interested individual selling cryptocurrency needs to inform the exchange, so that the currency will be locked for sale. The buyer needs to pay the seller directly via normal banking accounts. As soon as the seller confirms the payment to the exchange, the currency will be released by the currency platform to the buyers. As reported on Business Today, in this mode of transaction, the exchange will merely act as a facilitator.
The RBI took this initiative in order to safeguard regulated entities from becoming susceptible to risks pertaining to cryptocurrencies. The government has also not authorized any of the virtual currencies as a medium of exchange. It has also refrained from issuing license to any agency that works as crypto exchange. In a statement issued in December last year, the Finance Ministry has stated that virtual currencies are not backed by government fiat. Some of the major virtual currencies are Ethereum, Ripple, Bitcoin, Zcash, and Dash. In April 2018, the Central Bank instructed all regulated entities from offering services to business entities or any individual dealing with virtual currencies.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]