Paytm Payments Bank Ban: How Will It Impact The Crypto Market?

India’s central Bank, the Reserve Bank of India (RBI) has cracked down on One 97 Communication’s Paytm Payments Bank lately. RBI has imposed several sanctions on the Paytm Payments Bank, citing regulatory concerns. This move could also affect India’s already weary crypto arena as Paytm is one of the prominent modes of payment for crypto purchases.

RBI’s Ban On Paytm And The Aftermath

On January 31, RBI announced a ban on accepting deposits or top-ups to Paytm Payments Bank and its linked services. The regulatory action is attributed to “persistent non-compliance and continued material supervisory concerns” under Section 35A of the Banking Regulation Act, 1949. This move, affecting millions of users, underscores the gravity of the concerns raised by the RBI.

Shortly after these sanctions were announced, One 97 Communications Limited responded by revealing plans to strengthen its ties with leading third-party banks. OCL aims to navigate the ban’s impact by expanding collaborations to distribute payments and financial services products.

The Paytm Payments Bank ban will come into effect after February 29, marking a setback for Paytm and its users. Furthermore, it’s essential to note that the One 97 Communication stock plunged 36% after RBI published the notification. This escalated the losses after the stock’s IPO as it is down nearly 70% since inception.

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How Will The Paytm Payments Bank Ban Affect Crypto Market?

While Paytm doesn’t allow investing in crypto directly, one can use it to make payments on various verified crypto exchanges in India. However, the recent clampdown on the Paytm Payments Bank could complicate the process for crypto purchases. Since people wouldn’t be able to add deposits to their bank account after February 29, they would have to resort to the limit of their existing balance if they choose to invest in crypto.

Shift To Other Payment Options

Shedding light on the matter, Keyur Rohit, a crypto influencer, stated that the situation for the crypto community would worsen due to this development. He acknowledged the concerns of the Web3 community as Paytm serves as a major payment solution for crypto investors. The crypto influencer explained, “With Paytm’s banking services suspended, crypto users may need to explore other payment methods, potentially affecting the efficiency of transactions.”

After the ban, those using the Paytm Payments Bank to make crypto purchases would have to explore other options on the platform, such as UPI. In addition, they might also have to explore other banking service providers to combat the fund deposit restriction in Paytm Bank. Moreover, crypto users would have to consider factors, such as the bank’s compatibility with the crypto exchanges concerned, reliability, charges etc. It would be a hectic task for those who have been relying on the Paytm Payments Bank for crypto transactions.

Reduction In Crypto Market Inflows

The uneasiness could eventually lower the number of transactions performed or could lead to a heap of unsuccessful transfer attempts if the investors fail to identify the perfect replacement for the Paytm Payments Bank. Ultimately, it could lead to a reduction in the crypto market inflow from the Indian Web3 community.

However, the magnitude of the impact isn’t expected to be much since most crypto users resort to different modes of payment to make purchases. In addition, the already funds in the Paytm Payments Bank can be withdrawn even after the ban. Hence, users might choose to execute a complete withdrawal to ensure seamless crypto trading.

Prospect For Innovation & Collaboration In The Web3 Domain

On the other hand, Keyur Rohit underscored a positive aspect of the development, noting that it could foster collaborations and innovations in the Web3 ecosystem. The influencer stated, “This situation creates challenges but also opportunities for the crypto industry to adapt and innovate in collaboration with evolving fintech solutions.”

Also Read: Paytm Faces RBI Sanctions, Stock Plunges 20%