Zebpay, the largest cryptocurrency exchange in India, has warned its users that they may soon be unable to cash in on their earnings. In April, the RBI banned banks from doing business with cryptocurrency exchanges like Zebpay, that trade in virtual currencies like Bitcoin. “While our industry is challenging this [ban] legally, the outcome is beyond our control,” the exchange warned in a banner on its website. “Hence, if you are holding any rupees in Zebpay, there could soon come a time when we may not be able to honor withdrawal requests.” The RBI’s deadline for banks to blacklist such exchanges is July 6.

No consultation

In response to an RTI application, the RBI revealed that its circular to banks to stop dealing with crypto-based businesses was not based on any consultation, research, or committee recommendation. This raises eyebrows considering the divisive appeal that cryptocurrencies like Bitcoin have. While the previous RBI governor Raghuram Rajan warned that crypto can be a risky investment and an unreliable currency, the central bank maintained an arm’s length distance when it came to actually doing anything to declare cryptocurrency unlawful.

Legal challenges

Representatives of crypto traders were quick to challenge RBI’s circular. Even the Internet and Mobile Association of India (IAMAI) joined petitioners in challenging the circular. The Supreme Court is considering all challenges together and will hold its next hearing on 20 July. In the meanwhile, it has declined to stay RBI’s ban. Cryto exchanges haven’t stopped, though. While Zebpay is continuing to operate with a warning, Belfrics India, another foreign-owned exchange, briefly pulled out of India but returned on Wednesday.

Exchanges based abroad may find it easier to get users in India to buy cryptocurrencies through payment cards on international networks like Visa and MasterCard. But withdrawing that money requires Indian banks to play ball. And post-July 6, investors may grapple with their crypto holdings being worthless as the challenges to the RBI proceed in court.