Banks in India, reportedly, have reached out to the National Payments Corporation of India (NPCI) seeking clarity on the ongoing relationship between cryptocurrencies and country’s unified payments platforms (UPI). As per Economic Times, the NPCI is being asked about how crypto assets and UPI are related and if there are necessary protocols in the works for the same. The NPCI is responsible for managing the UPI platform, the most popular and aggressively growing digital payments mechanism in India over the past six years.
This clarification demanded by the banks in the country is a result of the recent friction between the NPCI and the crypto ecosystem that took place earlier in the month after Coinbase was asked to halt all UP-led purchases of cryptocurrencies. The American crpyto exchange giant, Coinbase, during the India debut was offering trading services in Indian rupee, by allowing users to deposit money on the Coinbase platform via a UPI portal.
Late on the same day, the NPCI issued a statement to Coinbase. The statement read:
“With reference to some recent media reports around the purchase of Cryptocurrencies using UPI, National Payments Corporation of India would like to clarify that we are not aware of any crypto exchange using UPI.”
Conibase had to disable UPI option in its platform
Subsequently, Coinbase disabled the UPI option on its platform, leaving Indian crypto enthusiasts no way of trading on the platform. Moreover, other crypto exchanges, including prominent names like CoinSwitch and CoinDCX also followed the path, discontinuing UPI payments on their platform over the next week. On the same topic, banks have asked NPCI has asked for verbal instructions on the next steps. However, the report published by The Economic Times also states that NPCI doesn’t have any such direction in pipeline.
Such statements from the regulatory body has reignited challenges in the crypto community, straining the relationships between crypto exchanges and related firms in the country. Digital payment wallet and platform, Mobikwik, also had to withdrew their services post the statement release by NPCI.
Strained concerns around cryptocurrency in India
Crypto exchanges in India have had troubled relationships with Indian banks since 2020. An unofficial letter from the Reserve Bank of India, in April-May 2021 led all banks to stop providing services to crypto exchanges overnight. Even so, some banks completely halted offering services related to crypto since then. This, combined with a 30% tax on crypto trading income in the country and 1% tax deduction at source (TDS) on crypto sellers have added fuel to fire.