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Paytm Payments Bank Takes U-Turn on Cryptocurrency

CIO Insider Team | Friday, 21 May, 2021

Paytm Payments Bank will no longer allow people to buy and sell crypto assets on its platform from Friday evening, when it will cease dealing with cryptocurrency exchanges, according to people familiar with the matter.

According to the people, PayPal and other payment processing companies that enable cryptocurrency purchases on their platforms may also pull the plug.

As per the details provided by an official Paypal spokesperson, PayPal and Venmo's crypto services are only accessible in the US.

Most banks cut links with cryptocurrency exchanges including WazirX, BuyUCoin, and Zebpay earlier this week after the Reserve Bank of India informally advised them to reconsider.

“Paytm Payments Bank's support will end tomorrow EOD (end of day),” a cryptocurrency exchange's CEO informed ET.

He states that the company has not officially explained as to why this is happening or whether it is related to a regulatory problem.

A number of payment processing companies have communicated their intention to withdraw support, according to several leading cryptocurrency exchanges.

According to insiders, the RBI has ordered payment processors to avoid working with cryptocurrency exchanges. The central bank has not issued any written directives to payment gateway firms, just as it has not issued any to banks.

Paytm's withdrawal comes after a period of significant volatility in cryptocurrencies, especially Bitcoin.

Currently there are very few possibilities for crypto exchanges to consider investments from Indian investors

Most recently, Bitcoin hit a three-month low on Monday, owing to speculation that Tesla would sell its bitcoin holdings. The drop was also a product of China's prohibition on cryptocurrency trading. According to insiders, this caused a lot of havoc at the Indian exchanges.

Many investors wished to liquidate and exit their positions, but were unable to do so. Banks declined to negotiate with exchanges, forcing them to develop alternative mechanisms.

Crypto exchanges have developed specialized wallets, onboarded payment processing firms, and used banks outside of India in the last few weeks. Some companies have also set up 'offline' payment networks to enable investors to access crypto assets.

Currently there are very few possibilities for crypto exchanges to consider investments from Indian investors.

Paytm's decision to stop working with crypto exchanges, according to industry watchers, coincides with the company's plans to create a New Umbrella Entity (NUE) in India.

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