Cryptocurrency payments have been frozen across India due to a lack of clarification between cryptocurrency exchanges and the National Payments Corporation of India, which controls the United Payments Interface (UPI).
This month, the Indian government is taxing profits from the transfer of any virtual assets, such as Bitcoin. Surojit Chatterjee, the product manager at Coinbase, made an unexpected announcement, which resulted in an unanticipated fallout in the Indian crypto market, according to Bloomberg.
Within three days of the incident, Coinbase suspended rupee transactions to its trading app over UPI. Coinbase wasn’t the only one that suffered a setback.
Since its announcement, at least four additional cryptocurrency trading platforms have either banned rupee deposits or had banks and payment gateways withdraw support for money transfers onto their platforms.
What happened
- The company’s chief product officer, Chatterjee, informed the audience at a Coinbase Global Inc. conference in Bengaluru, India, on April 7 that crypto investors will now be able to move funds to the country’s local exchange using the country’s online retail payments system.
- The central bank-backed the National Payments Corporation of India which handles the United Payments Interface said it was “not aware” of any crypto trade using the network hours after Chatterjee’s revelation.
- Coinbase has banned rupee transfers to its trading app via UPI within three days of the incident. This meant that Coinbase customers have no way of funding their accounts with rupees, dealing a blow to its expansion plans in India.
- “We are committed to working with NPCI and other relevant authorities to ensure we are aligned with local expectations and industry norms,” a spokesperson for Coinbase said in a statement to Bloomberg on April 11, referring to the National Payments Corporation of India, which operates UPI.
Notably, two other exchanges had lost support for rupee deposits from a payment service provider before the incident.
What you should know
- The National Payments and Settlements Institute (NPCI), founded by the central bank and the Indian Banks’ Association, is an umbrella body for retail payments and settlements in the 1.4 billion-person country. Requests for comment were not returned.
- The Economic Times reported on April 12 that CoinSwitch Kuber, a Bengaluru-based cryptocurrency exchange, had temporarily stopped taking rupee deposits via UPI and other banking channels. An emailed request for comment from CoinSwitch went unanswered.
- Crypto-trading firms in India have had an uneasy relationship with banks and payment services providers since 2018 when the central bank issued a directive to lenders to stop working with digital asset companies.
- While the Supreme Court in 2020 reversed that directive, some banks remained hesitant to work with the crypto sector — in part because top officials at the Reserve Bank of India have kept calling publicly for cryptocurrencies to be banned.
- Investors can also engage in peer-to-peer trading, where transfers of fiat are handled directly between the counterparties, although that represents a small share of the market in India.
Nairametrics reported that the Indian government also plans to tax cryptocurrencies and NFTs as the country moves closer to recognizing cryptocurrencies as legal tender. This is according to Nirmala Sitharaman, Minister of Finance and Corporate Affairs of India, while delivering the country’s annual budget.
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