A month after the Reserve Bank of India (RBI) barred regulated lenders from facilitating cryptocurrency transactions, trading volumes have surged dramatically alongside a sharp rally in prices.
Exchange operators, investors and analysts say people are rushing to take advantage of a three-month window the RBI has given banks to sever ties with cryptocurrency traders and exchanges.
Getting in now enables investors to convert rupees into cryptocurrencies, which they can later swap for other coins via private trading platforms even after the central bank's rules take hold.
"There is a positive sentiment in the industry that the government will not ban trading in cryptocurrencies, and even if formal banking channels cannot be used, people can move to crypto-crypto trading platforms," Shivam Thakral, chief executive of BuyUcoin, a cryptocurrency exchange.
"New investors are coming to our exchanges while existing ones are regaining interest after the drop because they're getting good value and are making money as the prices of cryptocurrencies move higher," he said.
Prices of the volatile bitcoin in India are back up to 618,000 rupees ($9,270), recovering from a low of 350,001 rupees after the central bank's announcement in early April.
Average daily volumes have also seen a sharp recovery and were as high as $75 million, close to levels before the rule changes, according to Pune, India-based cryptocurrency exchange Coindelta.
The government has taken a tough stance against the use of virtual currencies, fearing they could be used to finance illegal activities. The country's finance minister said in February that they should be banned as a payment system.
But many investors hope the government will soften the central bank's blow by regulating cryptocurrencies rather than banning them outright.
A panel with members from the central bank, the finance ministry and market regulator Securities and Exchange Board of India is expected to soon formulate a recommendation on what to do next.
People who have been trading cryptocurrencies would probably continue to do so if it remained legal, regardless of the banking ban, said 24-year old Shubham Yadav, co-founder and head of business at Coindelta.
Once the central bank's prohibition on commercial banks' involvement in cryptocurrencies takes effect, most trading is likely to move to peer-to-peer networks or social applications such as Telegram, according to retail investors.
In the meantime, some cryptocurrency traders have challenged the central bank's order in court, citing constitutional issues.
Analysts argue that pushing virtual currencies out of the formal banking system would be counterproductive because it puts the money completely out of view of regulators - making illicit transactions easier.
Lawyers are advising clients to hang onto their investments and take a "wait and see" approach.
Traders and investors, meanwhile, say they are just trying to stay optimistic. "Unlike fiat currency, prices of virtual currencies are based on people's beliefs and aspirations," BuyUcoin's Thakral said. "The long-term vision for us and the people who are investing now is that cryptocurrencies are here to stay."
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