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India’s SBI blocks crypto users from receiving funds via its UPI platform

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Just when financial institutions in India were reportedly softening their stance on crypto, a prominent bank in the country has stopped payments to crypto exchanges through UPI.

According to reports, the country’s largest lender, State Bank of India [SBI] has stopped payments to cryptocurrency exchanges using its UPI option. This news comes months after several banks in the country warned their users from sending money to these exchanges.

UPI, which is short for ‘Unified Payment Interface,’ enables account holders of a bank to send and receive money from their phones without the need for divulging bank account details or even net banking user ID and password. It is one of the most used ways to make payments in the country.

It is important to note that, National Payments Corporation of India [NPC], the umbrella organization for operating retail payments and settlement systems in the country that developed the instant payment system, have said that they are not banning crypto despite being a specialized division of Reserve Bank of India [RBI].

However, financial institutions such as the State Bank of India have their own decision-making abilities. With its latest move of blocking crypto users from receiving funds via its UPI platform, the payment avenues in the country appear to be shrinking at an alarming rate.

India’s WazirX affected by the latest move

Binance-acquired WazirX, which happens to be a popular crypto venue in the country, was also affected by the decision. Many users on the platform resorted to using one of the e-wallet services to transact. Its CEO Nischal Shetty said that they were trying to have a talk with the bank and put relevant points forward. He also added,

“WazirX follows KYC [know your customer] norms and AML [anti-money laundering] policies. Being the largest crypto exchange in India, millions of Indians are currently affected due to this move by SBI. We look forward to a positive resolution soon”

The lack of regulatory clarity in the country has been a major hindrance to crypto adoption. The latest decision by the bank will likely trigger other banks to follow suit. An official verdict on cryptocurrency exchanges in the country is yet to see the light of the day. Jayant Singh, Chairman of the Parliamentary Standing Committee on Finance, had recently stated that the government would take a “distinctive approach” to regulate the crypto ecosystem in India.

India could kick-start its CBDC pilot by the end of 2021

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As the world has been going digital, India seemed to be jumping on to this train. India’s central bank official revealed that the country was working towards a central bank digital currency [CBDC].

The world has been moving towards digitalization. The need to go digital spruced up following the emergence of the deadly COVID-19 virus that caused immense destruction. Even though the concept of CBDC existed during pre-COVID times, the need for it grew during and after the pandemic. China’s fast-paced development of the digital yuan further pushed governments across the globe to dive into the CBDC game.

Certainly, India did not want to fall back. The country was previously extremely hostile towards crypto, however, with time the government decided to fully learn about the space and then lay out regulations. Moving over to CBDCs, the governor of the Reserve Bank of India, Shaktikanta Das noted that India was making progress with regards to the development of a CBDC.

India’s central bank governor reveals CBDC trial phase date

In an interview with CNBC, RBI governor Shaktikanta Das suggested that the bank would roll out its first CBDC trial by December of this year. He added,

“We are being extremely careful about it because it’s completely a new product, not just for RBI, but globally. […] I think by the end of the year, we should be able to — we would be in a position, perhaps — to start our first trials.”

Furthermore, speaking about the Indian rupee, the governor noted that the central bank was looking into the impact of the digital asset on the country’s financial sector. In order to do so, the bank is reportedly inspecting an array of aspects of the asset to figure out its influence on the monetary policy and the existing currency.

The country’s recent interest in the development of a CBDC could pose beneficial as it would put itself in the ongoing CBDC race.

India’s SEBI is betting big on blockchain technology

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The narrative of “blockchain, not Bitcoin‘ across the world is slowly reversing. But not in India. The country’s regulatory entity, Securities and Exchange Board [SEBI] has once again restated its interest in distributed ledger technology for the purpose of monitoring and recording financial instruments.

According to a recently released circular, SEBI revealed its intentions to launch a system for “security and covenant monitoring” for non-convertible debentures [NCDs] beginning April 1, 2022. The entity’s decision to adopt blockchain technology signifies yet another important breakthrough for the emerging technology with respect to adoption within the financial system in India. SEBI also said that the integration of distributed ledger technology [DLT] into the country’s financial instruments is likely to enhance system efficiency multifold.

The market regulatory in a statement also stated that blockchain technology offers better protection against different types of cyberattacks because of its distributed nature, which removes the single point of attack possibility.

The document read,

“The system using Distributed Ledger Technology [DLT] shall be used for recording of the process of creation and monitoring of security [viz. due diligence, charge creation etc.], continuous monitoring of covenants by Debenture Trustees [as applicable], credit rating of the non-convertible securities by the Credit Rating Agencies, etc.”

India’s lagging blockchain ecosystem

India is one of the fastest-growing nations in the world and even plans to have its own space station someday. But when it comes to technological advancement and financial inclusivity, the country has struggled to come up with a solution. According to the World Economic Forum [WEF], over 10% of global GDP could be stored on blockchain systems by the year 2025. And yet, a country where the government has embraced the technology, India is far behind the US, China, Australia, and Japan.

According to reports, blockchain technology is one of the most sought-after skill sets in India. But the lack of manpower with a relevant skill set has led to a magnificent salary boom. Despite India’s young demography, the country has been quite late in the game.

Binance drowns in troubled waters as regulatory pressure surges

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Of late, Binance has been making news following regulatory pressure from all across the globe. This stress seemed to be increasing as regulators from India as well as Malaysia have got their eyes on the world’s largest cryptocurrency exchange.

Over the last few weeks, Binance has been undergoing immense scrutiny particularly from regulators in the UK, Japan, and Ontario. While the exchange has been dealing with this, a few other countries decided to join the list. India’s stance on the crypto-verse has always been puzzling, however, this time Malaysia went on to take down the exchange.

In a recent announcement, the Securities Commission of Malaysia released a statement asking Binance to put a hold on all its entities in the region. The regulator gave the crypto exchange a window of 14 days starting from 26 July to address the issue and take down its mobile application as well as the website. Additionally, any sort of campaign through media was also asked to be discontinued.

The announcement further read.

“Investors are advised to stop dealing with and investing through illegal DAX. Those who currently have accounts with Binance are strongly urged to immediately cease trading through its platforms and to withdraw all their investments immediately.”

Along with this, Bloomberg revealed that an anti-money laundering entity in India was probing Binance. The regulator would reportedly question the exchange about its association with a Chinese betting application. Even though nothing has been discovered, WazirX has been under the purview of the government for allegedly being a part of a $134 million money laundering case.

Binance ceases futures and derivatives functions across Europe

Amidst the exchange’s fallout with the UK, it was seen shutting shop. The exchange has elevated its move of steering away from Europe and has decided to terminate its futures and derivatives function. Users from Germany, the Netherlands, and Italy would be barred from creating new futures or derivatives accounts.

Indian govt. investigates Binance-acquired WazirX over forex law violations

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While Binance deals with immense pressure from regulators across the globe, an Indian crypto exchange acquired by Changpeng Zhao’s crypto platform has found itself in troubled waters with the country’s financial regulator.

Binance went on to explore and expand its services across the globe. Not very long ago, the platform was interested in one of India’s prominent crypto exchanges, WazirX. Soon after this, Binance acquired the Indian crypto platform even though the crypto scene in the country wasn’t very clear. While the status quo of crypto in India remains hazy, the country’s, Directorate of Enforcement [ED] called out WazirX for violating the Foreign Exchange Management Act.

Indian crypto exchange called out for infringing forex laws

India’s financial regulator Directorate of Enforcement [ED] issued a notice to WazirX for carrying out transactions worth $372 million or 2,790.74 crore rupees involved in violating specific forex laws. The Economic Times revealed that the Indian crypto platform was investigated for initiating cross-border payments without any government /regulatory oversight.

Addressing the same, an official from the ED told the news portal,

“These were carried out in violation of forex rules. WazirX’s platform allowed clients to transfer cryptocurrencies without proper documentation, making it a route for laundering. [..] Since money has crossed borders, the law of the land applies and one needs to be sure that this money isn’t cheap money (cheap money is a low-interest loan) or dirty money (used for illegal activities).”

Even though WazirX has robust KYC and AML processes, the ED official suggested that they weren’t enough to make certain digital assets weren’t being misused.

The entire crypto-verse fought long and hard to steer away from its association with the dark web. Once again linking Bitcoin to the dark web, the ED official added,

“In the absence of any official digital currency and regulation, there have been instances of Bitcoins being used to buy drugs on the dark net as well as for money laundering.”

As Indian crypto platforms have been working with the government to formulate better laws/ regulations for the industry, the latest news could hinder the progress.

Blackrock and Fidelity boost Indian Payment Service App Pine Labs After Round of Investments

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Digital payment platforms found a new footing in the past year with the pandemic cutting off methods of transactions. The influx of new users boosted several new companies and the capital coming in from traditional investors and VC’s. Pine Labs Pvt was the latest company to enjoy this surge, closing a $600 million fundraising with Fidelity Management & Research Company and BlackRock Inc. According to inside sources, the company makes money by charging micro-fees per transaction.

The Indian payment service organization led by chief executive Amrish Rau is currently valued at $3 billion after an investment round advised by Newberger Berman Group LLC, India-based IIFL Finance Ltd and Kotak Funds. Rau claimed that the users appeal Pine generated in its launch countries was inspiration enough to push for global adoption. He added:

“It is a product from India that’s succeeded in Malaysia and Singapore and is entering Indonesia and Thailand. We’ve got a good, Ebitda-positive story as we plan our IPO in the next 18 months. A growing number of merchants in Asia want to create faster and more interesting checkout experiences. They want solutions that help them compete with large online companies.”

Pine Labs offers multiple digital solutions for customers in the realms of transactions and reconciliation. The “pay later” feature covers more than 100 million customers with their finances and holdings. The digital platform’s client list includes Apple, Starbucks Corporation, Temasek, and McDonald’s. Fintech’s impact on the South Asian market has been evident in the last couple of months with regions like India and China taking the lead on developments. India’s fintech market boom was enough to make it grow at a whopping annual rate of 50 percent.

Fintech solutions have been gaining massive traction all over the world and their adoption in countries where digital assets were banned earlier is a good sign. Pine Labs’ foray into the South Asian and later, global market, was enough to let it start looking at more developments. The organization also acquired pay-and-save application Fave in April to build on its transactional foundation.

India may ask overseas crypto exchanges to pay 18% tax

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The crypto scene in India has been subject to many twists and turns. The citizens of the country had to endure the uncertainty of the legality of cryptocurrencies. At the same time, the government is still deciding on the status of cryptocurrencies. rumors pertaining to laws surrounding the crypto-verse continue to surface.

Similar to several countries across the globe, India went on to embrace cryptocurrencies right after the market soared to a high of $2 trillion. The government noted that it would make better regulations for cryptocurrencies in the country.

In more recent news, the country revealed that overseas cryptocurrency exchanges functioning in India would have to pay an 18 percent tax. With the whole country paying up goods and service tax [GST], cryptocurrency platforms would also have to join the list.

Indian crypto exchanges fail to secure partnerships with banks

While the government is still probing the prospects of the crypto industry, crypto exchanges were seen having a hard time securing prominent payments solutions. India’s central bank, the Reserve Bank of India [RBI], steered away, saying that it wasn’t in support of cryptocurrencies. Disruption of financial stability seemed to be one of RBI’s main concerns.

Speaking about the same, the co-chief executive of ZebPay, Avinash Shekhar said,

“Banks are reluctant to do business. We have been talking to several payment partners but the progress has been slow.”

This has further urged these platforms to seek alternatives like smaller firms. However, these aren’t stable yet, the founder of an Indian crypto platform noted. Veering into smaller firms would be a temporary solution, the founder stated.

However, issues like this have paved the way for an increase in peer-to-peer transactions, as they eliminate the need for a payment processor. The chief executive of a crypto exchange said,

“Predictably, alternate transaction methods such as P2P have increased, which makes the market more inefficient and also exposes customers to the risk of fraud.”

IDBI Bank’s technology arm set to launch digital services in India with global partnerships

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India’s relationship with the cryptocurrency market has been a rollercoaster with bans being lifted and banks acting aloof when it comes to cryptocurrency transaction complaints. Despite the pushback, the digital asset industry has grown to such an extent in the country that even mainstream financial bigwigs were entering the field. IDBI Intech Limited was the latest entrant into the fintech space with plans to expand into Europe, Japan, and other major South Asian markets.

IDBI Intech is owned by IDBI Bank which provides banking services to millions of citizens across the country. The Bank also has plans to divest 49 percent of its total stake in the Infotech firms to take it to new developmental heights. At present, the bank’s Capital arm is tasked with the responsibility of finding a strategic investor.

The bank has also roped in UK-based Lemon Advisors to expands its products and services to international customers. IDBI offers products in the Financial Crime and Payments sector, an area that requires the highest standards of security checks. Surajit Roy, the MD, and CEO of IDBI Intech stated:

“This association will help IDBI Intech access global markets by leveraging the significant reach that Lemon Advisors brings on board, across the geographies in Southeast Asia, Japan, Australia, the UK and the EU.IDBI Intech posted an income of Rs 115.08 crore with net profit of Rs 12.07 crore in 202021, up from Rs 99.09 crore with net profit Rs 9.07 crore in 2019-20. It plans to total reach revenues of Rs 180-190 crore in two-three years.”

According to the bank’s chief executive, the organization plans to amass a profitable global portfolio by the end of 2023. This projections comes at a time when analysts have called for sunnier financial forecasts. It is estimated that by 2024, the total global spends by institutions on regulatory compliances will hit the $6 billion mark.

Cryptocurrency trades makes big moves in gold dominated India

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The cryptocurrency market’s popularity vector has broken all ceilings with every realm of the financial world paying close attention to its developments. Even with all the recurring price fluctuations, the industry seems to have instilled a sense of trust amongst the public especially in nascent markets such as India.

Recent reports from the subcontinent claimed that the usually gold-obsessed Indians were pouring billions of rupees into the world of digital assets. Most of the investments came from the younger age group of 18-35, a generation that was reversing the trend set by their predecessors. Indian households contain close to 25,000 tonnes, most of which are seen as generational assets. Even in this climate, the cryptocurrency market has grown in leaps and bounds with transactions accounting for over $200 million.

Many young Indians agree that they would rather put their money into crypto than a traditional asset like gold. New traders have found out that the short-term sales and big profits made digital assets a more lucrative purchase than a majority of the options available now. The privacy and transparency aspect of digital assets was another beacon for new entrants to the market. Sandeep Goenka, the founder of Zebpay added:

They find it far easier to invest in crypto than gold because the process is very simple. You go online, you can buy crypto, you don’t have to verify it, unlike gold.

Despite the industry’s success, it still had some way to go before it can overtake the gold market in the country. As of now, India’s $40 billion cryptocurrency market trails behind the Red Dragon’s $161 billion. For now, the increasing adoption is another sign of Indians’ willingness to take risk within a consumer finance sector that’s plagued with examples of regulatory short falls.

Crypto’s current stardom comes a few years after the Reserve Bank of India banned transactions in the country after calling out frauds and weak legislation. The ecosystem continued to receive pushback even after the Supreme Court quashed the ban last year and made all cryptocurrency transactions legal in the country. Investors believe that over time, digital assets will be adopted by nations worldwide.

Zebpay to aid in formulating India’s crypto regulatory framework

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Prominent cryptocurrency exchange, Zebpay joined the list of several crypto platforms in India in coming together in order to lay out better regulations for the country.

The crypto scene in India has been quite confusing for many. While several authorities of the country have been hinting at an imminent ban, the Finance Minister of India, Nirmala Sitharaman asserted that the Indian government was taking a “calibrated” approach towards crypto regulations. The government has even set up a panel to regulate the crypto market.

Alongside all of this, IndiaTech, a platform focused on inducing regulatory clarity in the country came to be. This platform has been garnering the help of several crypto firms across the country. Zebpay is the latest to jump onto this.

Zebpay dives into IndiaTech

With Zebpay affirming its involvement with IndiaTech, it was noted that several platforms have considered diving into the project. Addressing this, the CEO of IndiaTech, Rameesh Kailasam stated,

“The exchanges liked the approach we took to address the issues. Crypto exchanges want to be part of IndiaTech because we have moved the needle in the past few months on the narrative and perception of this industry.”

IndiaTech isn’t the only project that Zebpay was part of. The crypto exchange had also joined prominent Indian cryptocurrency platforms like CoinSwitch Kuber, WazirX as well as CoinDCX to be a part of the Blockchain and Crypto Assets Council [BACC].

An anonymous executive from a platform revealed that he was considering joining IndiaTech. He added,

“It’s all about trying from different bodies and seeing what works. There’s unlikely to be a single regulator anyway, so we’re just trying to do different things to see what works.”

While India is home to an array of crypto exchanges, the government seemed to be moving towards regulating the industry. As Indians await regulatory clarity, the crypto market continued to slump without a stop.