Even as the legal uncertainty on crypto currencies looms in India, crypto currency exchange Unocoin has launched its first ATM in Bengaluru. Through this ATM, traders can deposit physical cash (in rupees) in their crypto wallet and can trade in bitcoin and other cryptocurrencies.
If a trader wants to get some cash, he just needs to sell his crypto currencies on the Unocoin platform, and he would be able to withdraw the money from this ATM. Unocoin has found this workaround after the Reserve Bank of India (RBI) in April banned banks and all entities it regulates from dealing with or providing services to any individual or business entities dealing with or settling virtual currencies. By setting up an ATM that accepts and dispenses cash, Unocoin has circumvented the RBI rule.
Unocoin said, “Owing to the RBI’s recent notification on ‘prohibition on dealing in virtual currencies’, our banking relationships were disrupted some time ago. Since then, we were in the process of deploying new mechanisms for rupees deposits and withdrawals. Now we are here with the implementation of kiosk.”
“Our ATMs are capable on accepting and dispensing the cash. Through Unocoin ATM, traders can deposit rupees within some limits. At the same time, they can withdraw their money,” Sathvik Vishwanath, Co-founder and CEO of Unocoin told Business Standard. He said the ATM was functional and available for trading crypto currencies.
How it works
“We are installing the same ATM that banks use. We just modify its software to connect it with our server to reflect the transaction,” said Vishwanath.
To deposit rupees into the crypto account, a user would log in to the Unocoin account on the ATM, confirm account details and deposit the money into the ATM. The Unocoin account is updated instantly, and can be used to buy any cryptocurrency.
The user can also withdraw the money that he obtains by selling crypto assets. For withdrawal, users will have to make a request by visiting the exchange website or mobile app, where the desired withdrawal amount is specified. The 12-digit reference number from exchange is sent to the user. The user would then visit the Unocoin ATM to enter the reference number and OTP to withdraw the money. Unocoin has said minimum amount for deposit and withdrawal is Rs 1,000 and must be in multiples of Rs 500. Users are subject to some limits on deposit and withdrawals per transaction and per-day subject to cash handling restrictions in India. These are still early days and Unocoin will need to find the right amount of cash in the ATM. If there is less deposit and more withdrawal, “it will come to a situation where cash is not available in the ATM,” said Vishwanath. “In the other case, when deposits are too many and withdrawals are less, we are planning to hire a cash management service or agency,” he added.
According to the RBI directions, banks and other financial entities cannot provide any service to cryptocurrency dealers or traders. Kashif Raja, co-founder of Crypto Kanoon, a blockchain and cryptocurrency legal advisory platform, said recent step taken by Unocoin seemed to be legal but “we have to wait and watch”.
“As a regulator, RBI directs banks and other entities to stop services with persons or agencies, who are dealing with crypto assets. Unocoin is not using any banking channel for this process,” said Raja. He said, by law, a person can transact in cash as long as it is under Rs 200,000 and Unocoin too cannot exceed this limit, else legal action can be taken against the exchange.
However, if there are more deposits than withdrawals, the exchange would need to deposit the cash in a bank account and then the bank can ask the source of the deposited money. Vishwanath said owing to less liquidity in crypto market, such a situation was possible. “We are working on it,” he said. Post RBI ban, many exchanges are working on other solutions. Some exchanges have also started peer to peer trading on their platforms. Unocoin is also planning to install these ATM in Delhi and Mumbai in couple of weeks.