Banks in India have contacted the National Payments Corporation of India (NPCI), a government agency under India’s Central Bank Reserve Bank of India that is responsible for operating retail payments and settlement systems in the country.
They contacted NPCI to clarify the relationship between cryptocurrencies and the country’s Unified Payments Interface (UPI) platform.
Local banks recently convened to request that the National Payments Corporation (NPCI) issue a formal guideline prohibiting the use of UPI payment systems for buying and selling digital assets.
The decision comes after Coinbase, a US-based crypto exchange recently opened its crypto trading services in the country and declared that its CEO, Brian Armstrong, would accept UPI payments for crypto transactions.
The ambiguous crypto situation in India
On April 7, Coinbase began offering trading services in India. Following that, it announced that users in the country would be able to purchase cryptocurrencies through the UPI system.
The NPCI fined Coinbase as a result of this, and the authority investigated the company. Shortly after, the National Payments Corporation (NPCI) made an official statement explaining that it is not aware of any cryptocurrency exchange in the nation that uses UPI.
Following the NPCI’s explanation, all major crypto exchanges in the country blocked UPI payments on their sites, including billion-dollar firms CoinSwitch Kuber and CoinDCX.
Major banks have purportedly suspended all online banking alternatives for crypto transactions.
Banks have now requested official guidance from the NPCI on how to proceed with adopting the UPI system for cryptocurrency transactions.
According to sources, the NPCI is unlikely to release any of these orders very soon.
NPCI refused to limit money transfers for cryptocurrency trading in May of last year instead of leaving it up to individual banks to assess their own risk threshold.
Banks in the country were prohibiting various crypto exchange and investment transactions during that time.
The NPCI’s newest statement, released earlier this month, has reignited the tense relationship with cryptocurrency exchanges. Local banks are now hesitant to supply crypto exchanges with deposit channels.
The use of cryptocurrencies by 20 million Indians is being harmed by confusion in the banking system. India’s supreme court overturned the RBI (Reserve Bank of India 2018) decision to prohibit banks from providing services to crypto businesses in March 2020.