When purchasing cryptocurrency assets through p2p transactions in countries where there is a ban on banking services, the fiat funds you have prepared may not be enough to purchase the asset you have chosen, since its price may change dramatically during the transaction.
In a normal transaction, if cryptocurrency exchanges are banked, the purchase/sale of cryptocurrency assets is instantaneous and the price is immediately locked. However, in a P2P system, when the seller agrees with the buyer and the transaction begins, the seller's crypto asset is deposited with a third party. The buyer transfers the amount to the seller before receiving the asset after a certain process, which may take some time. It is very likely that during this time the price of this crypto asset may change dramatically. If the price decreases, the buyer will be at a disadvantage and vice versa. Cryptocurrency exchanges in India have found a solution to this problem with the help of stable coins.
A stable coin (or stablecoin) is pegged to fiat or another asset whose price is more stable than the price of bitcoin or ethereum, for example. Therefore, a stablecoin can be used to eliminate volatility risks. Companies issuing stablecoins maintain a reserve of assets backing their stablecoin in publicly verified accounts equal to the amount of stablecoins issued.
Thus, in a P2P transaction, the seller can convert the crypto asset into a stablecoin to lock the price, i.e. if the price is locked at $1,000, the buyer will transfer the amount within the stablecoin and the rupee will remain unchanged for both buyer and seller. This allows the buyer and seller to work with a known set price. After the transaction, the buyer can use the stablecoin when trading cryptocurrency pairs.
Indian exchanges that provide P2P trading for rupees use stablecoins pegged to the US dollar. The Koinex exchange, and now Zebpay, uses the TrueUSD stablecoin, and WazirX uses Tether (USDT).
All stablecoins have advantages and disadvantages in terms of transparency of issue or audit, however, in the face of banking restrictions, they allow legitimate fiat transactions and protect against large price fluctuations.
According to https://www.livemint.com
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