Some participants in India's cryptocurrency industry have found a way to trade digital currency despite Indian banks being forbidden from servicing crypto exchanges, according to a July 30 report from Indian news outlet Business Today.
In April of this year, the Reserve Bank of India (RBI) banned entities regulated by the RBI from participating in the digital currency industry or providing services to crypto exchanges. But, like the rum runners who found a way to circumvent prohibition, a small segment of crypto investors in India have turned to a method called "dabba trading" to conduct their transactions.
Dabba trading, also known as "bucketing," has existed since the 1920s, and is a process unscrupulous brokers use to route trades through illegal channels rather than through a legitimate stock and commodity exchange.
When trading digital currencies such as bitcoin, a dabba trader takes cash from a client and purchases the desired crypto through an overseas trading account and then sells it at the client's demand. The client then receives their profit in cash after it is typically routed through a "hawala" channel, which, according to the US Treasury, is an alternative remittance system "operating parallel to or outside of traditional banking and financial channels." This method relies on communication between a network of trusted family members or regional acquaintances, called hawaladars or hawala dealers, to complete trades and transfers.
History has taught that when any government places a ban on something valuable to the public, citizens will find a way around the rules. Iran recently banned the use of crypto for trades and transactions, while Vietnam prohibited the use of digital currency by financial institutions and temporarily banned the importation of crypto mining rigs. Both countries would do well to monitor what's happening in India.