The Reserve Bank of India’s (RBI’s) April diktat that banks stop dealing in virtual currencies has paved the way for dabba trading in bitcoins and other cryptocurrencies. The grey market, operating in Mumbai and Ahmedabad, is seeing a flurry of activity in cryptocurrency trading, most of it in bitcoins.
‘Dabba trading’ is a process by which a broker does not execute trade on its system connected with commodity or stock exchange and carries out trade using an overseas bank trading account by transferring money through hawala network. These accounts are mostly based in Europe, especially the UK, and Dubai.
The illegal method, mostly used for trading in stocks, has seen an upsurge as traditional Dabba operators are accepting bets on Bitcoin too, giving a boost to their overall earning. The recent positive fluctuation in Bitcoin, which saw its price plunge from $20,000 in December 2017 to $5,800 in June end and then $8,000 in July, has also led to a flurry of activity in its trading.
For Dabba trading, the people work as a bridge between a customer and foreign trading company. The broker accepts money in cash, buys Bitcoins using an overseas trading account and sells them when the bet placed in India is settled. The difference is paid in cash to the customer. Margins are settled the same day, usually by 8 pm, or, in some cases, in a week.
Also, to make sure no information is traced or leaked, the conversation mainly happens via messaging app Telegram, cloud-based instant messaging service with end-to-end encryption and the money in cash is routed through the hawala channels.
Such deals are also happening through official channels like brokers who maintain bank accounts in India as well as overseas. The customer deposits money in a bank account in India. The money is then routed through official or unofficial channels to the foreign account where Bitcoins are bought and sold.
The money is usually paid in cash or cheque to the investor following the deduction of commission or any loss. Interestingly, the RBI’s guideline on maximum $250,000 per annum overseas remittance window is being misused by many using the ‘Dabba trading’.
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