Crypto Angadias: RBI's crypto ban might incentivise human tellers for cryptocurrency transactions

Crypto Angadias: RBI's crypto ban might incentivise human tellers for cryptocurrency transactions
  • The Reserve Bank of India has banned regulated institutions from dealing with crypto exchanges.
  • The RBI's decision will come into effect in three months from now.
  • The move could effectively ban cryptocurrency in India.
When online poker first flourished in India, many players couldn't transfer money from their poker accounts to their bank accounts. This, basically meant that win or lose, they could make no liquid cash from playing Poker online.

The solution? Players decided to transfer the money amongst themselves within the poker sites. So, if you transferred $300 to my account on website A, I could transfer $300 from my bank to yours. The rationale being, that I was going to put in $300 in my poker account anyway.

That can't happen with cryptocurrencies anymore. The RBI today banned regulated institutions from dealing with crypto exchanges. The rule comes into effect three months from now, which is the time these institutions have to get their affairs in order.

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The move doesn't ban crypto usage in India, but it's almost like a demonetisation of cryptocurrency. Three months hence, you won't be able to perform NEFT, UPI or other transactions with crypto apps and websites, like Unocoin, Zebpay and more. This is two-way, meaning you can neither deposit nor withdraw from such apps and websites.

But India also isn't a stranger to cryptocurrency usage. Many have invested in modes like Bitcoin, Ethereum etc. In fact, a Bitcoin entrepreneur was recently arrested for scamming investors out of 2000 crore (just over $30 million).


Will they just lose all these investments?

Well, they obviously have three months to transfer these earnings to banks, converting them to cash and hence paying tax. Or, crypto exchanges could just start considering cold hard cash. That should work, at least as long as Demonetisation 2 doesn't happen.

For best results, when you want your cryptocurrencies to be exchanged for real money, exchanges will have to deliver cash to you. And if you think this is an impossible scenario, there's a case study already available.

Human Cash Haulers

An app called Abra employs "human tellers" to transfer money across the world, using the crypto medium. Unlike crypto exchanges, Abra operates like a regular e-wallet. Users load cash onto their wallets, which they can transfer to others. Abra, in turn, converts the money to cryptocurrency and uses the blockchain to transfer it across the world, or just a few metres away. The receiver has to find a human teller near him, which can be an individual or business, and take the amount in local currency.

Think of them as Crypto Angadias - the traditional Indian community of human couriers from Gujarat who haul cash for the diamond and gold industry in the state by operating furtively between Mumbai and Gujarat. It is said that Angadias carry a few hundred crore rupees worth of high-value goods and cash between Mumbai and Gujarat everyday.

For a cash-rich country like India, could this be a solution to continue crypto usage within our borders.

RBI wants its own cryptocurrency

Interestingly, while the government seems keen to ban cryptocurrencies, the RBI doesn't seem to have given up on the idea of floating one of its own. The apex bank has set up a panel to implement India's own fiat cryptocurrency, that's regulated and dispersed by banks.

While that may break the core philosophy of crypto modes like Bitcoin, i.e, democratising currencies, it could help reduce the cost of printing bills. It would also be in line with the government's push to promote digital payments in the country.

While the RBI's ruling may have effectively banned the use of cryptocurrencies in India, the country doesn't seem ready to give up on it yet.