Indian cryptocurrency exchanges are scrambling to secure viable, permanent payment solutions to ensure seamless transactions after banks and payment gateways started cutting ties with them, six industry insiders said.
The exchanges are struggling to cope after the central bank, the Reserve Bank of India (RBI), which has said it does not favour digital currencies, out of concern over their impact on financial stability, informally asked banks to steer clear.
Customer complaints have inundated all India's key exchanges as the pullout by major payment gateways has hit transactions, according to social media and users.
"Banks are reluctant to do business," said Avinash Shekhar, a co-chief executive of ZebPay, one of India's oldest crypto exchanges that is not offering immediate settlement.
"We have been talking to several payment partners but the progress has been slow."
Options being resorted to include tying up with smaller payment gateways, building their own payment processors, holding back on immediate settlements or offering only peer-to-peer transactions, the heads of five crypto exchanges said.
At least two exchanges have tied up with smaller payment processing firm, Airpay, as its larger peers have cut ties.
There is no official data, but India has nearly 15 million crypto investors, who hold more than 100 billion rupees ($1.34 billion), according to industry estimates.
THE ALTERNATIVE
Some crypto exchanges, such as WazirX, are forced to stick only to peer-to-peer transactions on certain days, while others, such as Vauld, allow bank transfers with manual settlement as they hunt for a payment processor, backing up settlements.
Even major payment gateways, such as Razorpay, PayU and BillDesk have severed ties, as they too are dependent on banks to process transactions and the pullout by large banks has left them reeling.
The three payment processors did not respond to a request for comment.
Some others, such as Coinswitch and WazirX, have signed up with a smaller Mumbai-payment processor, Airpay, for instant transfers.
The payment gateway is backed by venture capital fund Kalaari Capital and billionaire stock investor, Rakesh Jhunjhunwala, who has been vociferous in his opposition to cryptocurrencies.
Jhunjhunwala did not immediately reply to an email seeking comment.
Smaller payment gateways have not proved very successful in executing high volumes of transactions, leading to failures that have resulted in a flood of user complaints.
The lack of support from banks means that smaller firms, like larger counterparts, are also backing off from crypto activities.
"Partnership with the smaller payment processors has not emerged as stable yet, and is more of a temporary solution," said the founder of an Indian crypto exchange, who spoke on condition of anonymity.
Others, such as Bitbns, have built their own basic payment processor, allowing some essential transactions since the systems does not require prior approval from the Reserve Bank of India, the central bank.
"These are only stop-gap arrangements and not a solution to the problem the industry is facing," said Gaurav Dahake, chief executive of domestic exchange Bitbns.
Prohibition has not augured well, as it has forced customers to opt for peer-to-peer (P2P) transactions that allow buyers and sellers to engage directly.
"Predictably, alternate transaction methods such as P2P have increased, which makes the market more inefficient and also exposes customers to the risk of fraud," said the chief executive of another crypto exchange.