How a Bitcoin Exchange Is Surviving a Central Bank Crackdown in India

Indian regulators' clampdown on cryptocurrency businesses is forcing the exchange startup Unocoin to experiment with stablecoins and ATMs to continue receiving fiat deposits from customers.

Unocoin co-founder Sunny Ray told CoinDesk his company hasn't been able to transact through regular banking channels with its 1.3 million customers for several months, after the Reserve Bank of India banned banks from working with crypto or crypto companies in April.

Most recently, Unocoin set up an ATM in a Bangalore mall where customers can deposit rupees to their exchange accounts without a bank or credit card.

Some users are quickly transferring their rupees to the ethereum-based TrueUSD token, which Unocoin began supporting in August, then using it to purchase bitcoin or other assets down the line when the price feels right.

As Unocoin investigates how to scale compliant ATMs, Ray said the team is also looking to expand to Malta and Canada, in case operating in India becomes impossible altogether, all while exploring the options for listing several new stablecoins.

The ban is having a disastrous impact on India's crypto community, with the popular exchange startup Zebpay abruptly shutting down late last month.

"The crypto community is suffering from this ban as there have been instances where the bank accounts of individuals have been closed who were found to be dealing in cryptocurrencies."

The crackdown has been so severe that Raza said it has created a misconception in India that bitcoin itself is outlawed, even though the ban only applies to entities governed by RBI. "From a regulatory perspective there hasn't been any real clarity," Ray said.

To the contrary, Raza said exchange accounts can sometimes require more know-your-customer paperwork than opening a new Indian bank account.

"It's almost kind of freeing in a way because there are a lot of people in India that don't have online banking," Ray said.