Apart from the regulatory conundrum, cryptocurrency exchanges are now facing a fresh problem of banks pulling the plug on cryptocurrency transactions. Banks have asked payment gateway operators to stop services to merchants trading in cryptocurrencies.
“Banks have third party-payment processors, whose work is to have deep integration with the bank. Whenever money used to get transferred. these payment processors used to tell us that this person has transferred this much money. We didn’t have to do much as we were dependent on the payment processor. Now payment processing has to be done by us through our bank account only. Now, since we don’t have any option, all exchanges will have to do it themselves,” Nischal Shetty, founder and CEO of WazirX, told Money9.
How can one buy or sell cryptocurrencies in such a situation?
“We are bringing more options. One which was always there was to use the Peer to Peer option, where one can directly transfer the money to the seller account. Second, we are launching a new option today where you can transfer money through UPI, which will go live by evening today. There is no need to worry as we will have multiple options. But traditional API relating banking where transactions were very fast will take time,” he said.
When the Reserve Bank of India in 2018 imposed a blanket ban on banks from dealing with cryptocurrency exchanges many exchanges had to shut shop. It was during this time WazirX created an auto-matching P2P engine. In this model buyers of cryptocurrencies directly transfer money to the seller of a crypto-currency.
“Traditionally, you send money to the bank account of exchange and through exchange you buy crypto. Now we will connect you with the seller and money will directly be transferred from your bank account to the seller bank account. And when you do this we transfer crypto to your bank account. It’s a three-party system.”
Shetty also addressed concerns about the P2P system and ruled out any chances of fraudulent transactions.
“We lock seller’s crypto in the escrow account. Once you transfer money, we confirm from the seller if money has been received. In this case, even if the seller is unresponsive, there is surety crypto is with WazirX and therefore there are no chances of fraud,” he said.
On the recent slump witnessed in cryptocurrencies, Shetty said, “The kind of traffic crypto is getting is unprecedented. It took us three years to reach 20 lakh customers. We got the next 10 lakh customers in April and now in May, we are seeing more customers. During the last crash, many people signed in and we did not anticipate it. All exchanges were unprepared for the crash in cryptocurrency prices,” he said.
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