Trading volumes have risen alongside cryptocurrency prices in India despite an impending ban on banking services for entities that deal in cryptocurrencies, (e.g., exchanges). The Reserve Bank of India announced the ban a month ago, giving financial institutions three months to cease services for cryptocurrency investors, traders, and exchanges.
Reports by Indian cryptocurrency exchange Coindelta indicate that daily trading volumes are back to around $75 million, similar to levels it saw before the rule changes were announced.
Cryptocurrency proponents and investors hope that the government will reverse its strict stance on the digital assets by introducing regulation rather than a complete ban. A panel of central bank representatives, the finance ministry, and the Securities and Exchange Board of India is expected to make imminent recommendations.
Shivam Thakral, CEO and co-founder of New Delhi-based cryptocurrency exchange BuyUCoin, expressed increased interest of both old and new investors, and said:
"There is a positive sentiment in the industry that the government will not ban trading in cryptocurrencies, and even if formal banking channels cannot be used, people can move to crypto-crypto trading platforms."
The other co-founder, Shubham Yadav, also said that cryptocurrency traders would continue despite the bank ban, so long as cryptocurrencies remained legal within India.
The government of India raised concerns that cryptocurrency use could finance illegal activity, and the finance minister declared in February that they should be banned as a payment system.
The central bank's move to disallow bank services for entities that deal in cryptocurrencies has been challenged in court, including by Kali Digital Ecosystems, which had committed investment toward creating an exchange in India. The Delhi High Court will hear its arguments against the Reserve Bank of India's ban on May 24, 2018.
The central bank's reasons for the decision included concerns about "consumer protection, market integrity and money laundering." However, it has created a working group to study the potential of a central bank-issued digital currency (CBDC).