The Reserve Bank of India (RBI) has given the deadline of July 5th for bitcoin trading via banking services. Thus, some cryptocurrency firms such as WazirX and Koinex are resorting to peer-to-peer trading. The solution launched by the two platforms is called the Koinex Loop.
In this kind of trading, buyers and sellers of cryptocurrencies can deal with each other directly while cryptocurrency firms can act as an escrow account that holds the cryptos during the transaction to avoid cheating.
“If banking is something the exchanges are not allowed to do, then the solution is that direct banking doesn’t come in,” said Nischal Shetty, chief executive of WazirX, talking to ET.
He explained the escrow system in this case and said WazirX has built a system in which before a seller sells a bitcoin, he/she needs to deposit the bitcoin into the company’s escrow for safekeeping. Once a buyer pays rupees to the seller, WazirX releases the crypto to the buyer, after getting a confirmation from the seller.
Koinex Loop solution will go live as soon as the RBI ban on banking services comes into effect.
The platform, however, is playing safe and aims to avoid any unscrupulous activity by allowing only registered users with verified KYC details to trade on the platform. It is different from websites like localbitcoin.com that allow strangers to exchange their local currency for bitcoins.
Ever since the apex banking body released a statement in April directing all regulated entities, including banks, e-wallets, and payment gateway providers, to stop dealing in the decentralized currency, cryptocurrency traders have been in a panic mode.
Recently, cryptocurrency exchange Zebpay posted multiple updates on its blog regarding the RBI deadline and currency withdrawal notice for its users.
On its website, Zebpay clearly stated that it will not be responsible if customers are not permitted to withdraw their funds in case there is a disruption in banking services.
In May, the Internet and Mobile Association of India came in support of cryptocurrency and filed a writ petition in the Supreme Court asking for a stay on the RBI decision. However, the apex court declined to hear it immediately and directed the transfer of multiple writ petitions challenging the constitutionality of the RBI circular to be heard on July 20.