Zebpay, one of India’s biggest cryptocurrency
exchanges, shut down last week. And if you didn’t withdraw the money from the Zebpay wallet or didn’t convert it into a virtual currency, you will need to wait indefinitely for the funds. However, those who have purchased any form of cryptocurrency
with the money have some respite.
Even after the Reserve Bank of India
(RBI) debarred banks from dealing in virtual currencies, many individuals continue holding money in their wallets. The banking regulator’s directive only bans the movement of money from wallets. But if a person had funds in the wallet, he could still trade. “Many are still buying and selling cryptocurrencies, using the money that remained in the wallet. They can buy and sell the virtual currencies in rupees,” says Santhosh Palavesh, chief innovations officer, Belfrics Group, a cryptocurrency
exchange. These are called as “INR” (Indian rupee) or “fiat 1currency” trades.
Zebpay has said the RBI’s curbs have crippled the exchange and its customers’ ability to transact business meaningfully. “After the RBI debarred banks from dealing in cryptocurrencies, other exchanges can also meet with the same fate. To survive, the exchanges must innovate and come up with newer solutions for investors and traders,” says Nischal Shetty, founder and chief executive officer, WazirX, a cryptocurrency
Zebpay’s exchange business shutting down is a wake-up call for traders and investors. They should not keep cash in the wallet because the funds can be blocked if the exchange shuts down. They need to move out of INR trades. A better option is to buy virtual currencies and use them for crypto-to-crypto trades. One popular cryptocurrency
is USDT or Tether, which many use internationally for crypto-to crypto trades. One unit of this virtual currency is equal to $1. If the price of a Bitcoin, for example, is $6,500, you will need equivalent Tethers to buy a Bitcoin, and when you sell, you will get 6,500 units of Tethers.
After the RBI’s directives, most exchanges allow individuals to trade in cryptocurrencies. “A person can use any company’s wallet to trade in virtual currencies,” says Palavesh. If you are a Zebpay user, for example, and you hold a cryptocurrency
in its wallet, you can do crypto-to-crypto trades on any other exchange.
If you hold virtual currencies in your wallet, you can also cash out your holdings on a peer-to-peer (P2P) platform such as WazirX. P2P exchanges connect the buyer and seller. All transactions are done using USDT and involve a two-step process. If you want to move money to your bank account, sell your cryptos for USDT and then sell that USDT for rupees on the platform. A buyer has to also follow the same procedure – buy USDT from another user and use Tether to buy other cryptos. The exchange escrows the USDT for safekeeping during the transaction.
Lessons for traders/investors
Don’t continue holding funds in the wallet
Stop rupee-denominated trades
Convert funds in wallets into a virtual currency
Opt for crypto-to-crypto transactions
Use P2P platform if you want to cash out