Hours after Chatterjee’s announcement, the central bank-backed institution that runs the system – called United Payments Interface – said it was “not aware” of any crypto exchanges using the network. Within three days of the incident, Coinbase had stopped the transfer of Rupee trading app via UPI.
suddenly left reversal coinbase Customers in their accounts with Rs.100 without funds in any way, a blow to its expansion plans in India. “We are committed to working with the NPCI and other relevant authorities to ensure that we are aligned with local expectations and industry norms,” a Coinbase spokesperson said in a statement to Bloomberg on March 11. UPI.
Coinbase wasn’t the only one affected. Since its announcement, at least four other companies providing crypto-related trading services have either suspended rupee deposits or seen banks and payment gateways pull support for money transfers on their platforms, the firms said. And according to local media reports officials. Prior to the incident two other exchanges had lost support for depositing money from a payment service provider.
industry downturn
Exchange officials said those actions put additional pressure on already falling trading volumes. The industry is set to impose a new tax on all crypto transactions above a certain size which will be effective from July 1.
Data from CoinGecko shows that daily trading volumes on Indian crypto exchanges, which collectively cater to around 15 million people, have fallen between 88% and 96% since peaking last year. According to the data, India’s largest crypto exchange WazirX saw a decline of 93 percent from its October high.
Investors who cash in crypto positions on an exchange can still withdraw their fiat currency. Coinbase already offers trading in crypto pairs in India, which does not require customers to deposit rupees into their accounts.
“Following the announcement from Coinbase, whoever was providing support to the industry has withdrawn support,” Vikram Subburaj, chief executive officer of crypto exchange Geotus, said in an interview on April 12. Giotto’s payment gateway stopped working with it, he said, refusing to be named, Subburaj said, adding that trading volumes on the platform fell nearly 70% as a result of the company.
Co-founder Atulya Bhatt said local rival BuyUcoin has also stopped payments through UPI following a notice from NPCI.
uncomfortable relationship
NPCI, an initiative of the central bank and Indian Banks’ Association, is an umbrella organization for retail payments and settlements in a country of 1.4 billion people. It did not respond to requests for comment.
Coinswitch Kuber, a Bengaluru-based cryptocurrency exchange, temporarily stopped accepting rupee deposits through UPI and other banking channels, The Economic Times reported on April 12. CoinSwitch did not respond to an emailed request for comment.
Crypto-trading firms in India have had an uneasy relationship with banks and payment service providers since 2018, when the central bank issued a directive to lenders to stop working with digital asset companies. While the Supreme Court reversed that directive in 2020, some banks have been hesitant to work with the crypto sector – partly because top RBI officials have continued to publicly call for a ban on cryptocurrencies.
As a result of the vigilance of the traditional banking sector, payment gateways such as Juspay and MobiKwik have become an important link between crypto exchanges and customers wishing to deposit fiat currency. Without their cooperation, investors are limited to using methods such as transferring funds to the current accounts of exchanges, a time-consuming manual process prone to errors. Coinbase does not offer that option in India.
peer to peer
Investors can also engage in peer-to-peer trading, where fiat transfers are handled directly between counterparties, although this represents a small segment of the market in India.
A payments service provider stopped working with crypto exchanges last year after banks were asked to do so, its CEO said, asking that he and his company not be named because of the sensitivity of the issue. .
According to a report by news outlet Moneycontrol, local payment service provider MobiKwik stopped working with Indian crypto exchanges on April 1. MobiKwik declined to comment. WazirX and CoinDCX, another Indian crypto exchange, have both announced that rupee deposits through MobiKwik have been temporarily suspended.
singled out
Restricting payment access without a legal basis to do so is unfairly alienating the digital assets industry, said Jaideep Reddy, an attorney at Nishith Desai Associates with expertise in technology.
“If a bank denies service to a crypto business, there must be a valid reason other than the mere fact that it is a crypto business,” Reddy said. “Banks should be transparent, as account holders also have a charter of rights which includes transparency from the service provider.”
Edul Patel, co-founder and CEO of algorithmic crypto trading firm Mudrex, said that payment gateways in India began to withdraw support following the Coinbase episode. The same happened with Mudrex, Patel said in an interview on April 12, refusing to name his partner.
The moves didn’t just affect trading, he said: Inflows into CoinSet, a mutual fund-like crypto product the Y Combinator-backed startup offers, fell nearly half in the past two to three days.
“While exchanges around the world are innovating on Web 3.0, Indian exchanges are busy finding the next payment provider,” said Subburaj of Jiotus.