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The Reserve Bank of India (RBI) issued a clarification on May 31st 2021, that banks have to adhere to last year’s Supreme Court cryptocurrency judgement, which lifted the ban on banking services for cryptocurrency trading in India. One month since the clarification, but cryptocurrency exchanges are still in flux. The RBI circular has not changed much, as many banks still continue to maintain a distance from cryptocurrency exchanges.

“While RBI has clearly stated the previous circular is not applicable anymore, we have not seen any significant response from the banks or other payment services providers to support the crypto industry. Working under an uncertain regulatory environment is difficult for everyone involved in this industry. We have enjoyed great relationships with many of our payment partners in the past despite these uncertainties. We hope clear laws and regulations around crypto help everyone involved to participate in this space confidently,” said Avinash Shekhar, Co-CEO of ZebPay.

The RBI circular in May came after several leading banks sent notices to their customers warning them of account suspension if they continue to deal in crypto transactions. Many at that time hailed it as a positive step hoping it will bring clarity about crypto trading. Contrary to the notion, exchanges are still struggling with banks still hesitant to associate with crypto trading.

“Though RBI has sent a clarification, banks have not opened up doors for cryptocurrency exchanges yet. Few banks have made it clear that they will be distancing from the cryptocurrency industry and few others are still evaluating with their compliance team. As an industry, the RBI circular seems to have made little or no effect for banking access,” said Vikram Subburaj co-founder and CEO of Giottus Cryptocurrency Exchange.

Payment gateways

Several exchanges have integrated with payment gateways for offering banking services. For example, the largest cryptocurrency exchange of India Wazir X has integrated with Mobikwik to facilitate crypto transactions. Earlier, Nischal Shetty, CEO WazirX told Money9 when the RBI issued a clarification in May “This document is a ray of hope for the Indian crypto ecosystem. We really appreciate the Reserve Bank of India’s clarification on this. We hope that this circular encourages banks to update their compliance teams and provide banking access to Indian crypto exchanges.”

P2P channel

In the absence of banking services, many exchanges also offer peer-to-peer channels where the transaction takes place directly between two parties with exchanges working as a custodian. Under the P2P channel the seller has to deposit crypto with the exchange and once payment confirmation is received from the seller the crypto is released by the exchange in the buyer’s account.