Paytm Payments Bank pulls the plug on cryptocurrency exchanges

Paytm Payments Bank will not allow people to buy and sell crypto assets through its platform from Friday evening when it will stop dealing with cryptocurrency exchanges, people with direct knowledge of the matter said.

Its rival PayPal and other payment processing companies that allow buying cryptocurrency on their platform may also pull the plug, they said.

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PayPal and Venmo’s crypto services are only available in the U.S, a PayPal official spokesperson said.

Most banks had earlier this week severed ties with cryptocurrency exchanges such as WazirX, BuyUCoin and Zebpay, after the Reserve Bank of India informally told them to reconsider ties with them.

“Paytm Payments Bank is ending their support tomorrow EOD (end of day),” CEO of a cryptocurrency exchange told ET on Thursday.

The company has neither given any reason for this officially nor told them whether this was due to any regulator issue, he said.

Many leading cryptocurrency exchanges told ET that a number of payment processing companies have communicated their intention to withdraw support.

An email questionnaire sent to Paytm did not elicit any response as of press time Thursday. PayPal, too, did not respond to ET’s query.

Insiders said the RBI has directed the payment processing companies to stop dealing with the cryptocurrency exchanges.

Like in the case with the banks, the central bank has not issued any written directive to the payment gateway companies.

The RBI did not respond to an email query ET sent on Thursday afternoon as of press time.

Paytm’s decision to pull out comes soon after cryptocurrencies, especially Bitcoin, saw a lot of fluctuations.

Bitcoin had fallen to a three-month low on Monday on speculation that Tesla may sell its holdings of the virtual currency. The fall was also a result of China banning any cryptocurrency trading in the country.

This had also resulted in a lot of chaos at the Indian exchanges, said insiders.

Many investors wanted to liquidate their position and exit but were unable to do so. Exchanges had to come out with alternate mechanisms as banks refused to deal with them.

In the last few weeks, crypto exchanges had created specialised wallets, onboarding payment processing companies, and using banks outside India. Some even set up “offline” payment systems to let investors access crypto assets.

Crypto exchanges are now be left with few options to accept investments from Indian investors.

Industry trackers said Paytm’s decision to stop dealing with crypto exchanges coincides with the company’s ambitions to launch a New Umbrella Entity (NUE) in the country.