Dabba Trading: Indian tradition vs. crypto prohibition

Indian crypto investors are seeking ways to circumvent cryptocurrency ban launched by central bank RBI in April. Some are now using Dabba trading: an almost one hundred year old form of trading. But it is not legal.

In the spring of this year Indian crypto investors lost their laughter. Because it was not a late April Fool’s joke, as the central bank of India on April 5th by circular letter to the banks of the country prohibited crypto currency business. As a provisional workaround, the local crypto exchanges concentrated on crypto-to-crypto-business. As the Indian news portal Business Today reports, more and more Indian hodlers are bypassing the ban, using a nearly one hundred year old form of trading: Dabba.

What sounds like Baby Talk in Central European ears is anything but child’s play for the Indian financial regulators. The process, also known as “bucketing”, is used to make money via illegal channels abroad. There it will be put on a stock exchange – in this case a crypto exchange. This is where a middleman, the so-called “Dabba-Trader”, comes into play: Like any other brokerage office, his office has stock-listed terminals with stock prices. The difference, however, is that the investor’s business is not executed through the Exchange System, but only in the books of the Dabba Trader.

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If Dabba trader succeeds in making a profit with his client’s money, for example by investing in a cryptocurrency, then usually a second, even much older, system of hedging succeeds: hawala.

Hawala is also a form of transaction execution that eludes access by traditional banks and regulatory institutions. A network of relatives or acquaintances is used. Thus, both the debtor and the recipient of the money each have a confidant, a “Hawaldar”. The debtor gives his money along with a passphrase to his Hawaldar, who transmits the password to the Hawaldar of the recipient. Regardless, the passphrase is also communicated to the recipient. He then goes back to his Hawaldar, calls the codeword, and receives the money.

In this way, any gain will go to Indian crypto investors who have chosen Dabba Trading. Of course, the whole thing is not legal, neither in India nor in Germany. However, Indian crypto investors have little opportunity to exchange their fiat money in cryptocurrencies. It shows once again that water and money have a crucial commonality: given liquidity, both find their way.

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