In the light of recent events concerning the curb on the Unified Payments Interface on cryptocurrencies, leading banks have now asked for a formal directive from the National Payments Corporation of India (NCPI).
The supposed “shadow ban” on cryptocurrencies has created a lot of conjecture amongst leading banks. This curb came into effect just based on apparent instructions from the NCPI.
Several banks ever since have blocked UPI payments on the basis of informal “verbal instructions” passed on by the NCPI. The regulatory body is related to looking after the retail payments and settlement systems in India.
If issued, The NCPI directive should be able to clear out the major confusion that has been raised in buying and selling virtual digital assets with UPI.
Banks Ask For Formal Directives Regarding Crypto UPI Support
NCPI had posed a lot of questions regarding the UPI method for payments related to digital assets as crypto exchanges such as Coinbase, CoinDCX, and WazirX had started to allow UPI to buy and sell cryptocurrencies.
NCPI owns and is responsible for the operation of UPI, however, it doesn’t govern it. It oversees and approves the participation of the customer banks, payment service providers and third-party application providers along with looking after the Prepaid Payment Instrument Issuers (PPIs) in the UPI payment structure.
In the recent meeting, Indian Banks have therefore asked for official instruction regarding their stance on the UPI situation. There doesn’t seem to be any clarity yet about the UPI issue as the NCPI stated there are “no intentions of a circular” at the present moment.
Some of the banks that have raised concerns also happen to be shareholders of the NCPI.
If there is a formal circular to ban UPI for cryptos or VDAs, whatever is the nomenclature, the crypto industry in all likelihood would legally contest it — as they had done when RBI imposed a ban in April 2018, stated a banker to The Economic Times
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Other Grey Areas
Bankers have also raised many questions regarding the authority of NCPI to curb the usage of UPI for transactions. It is so because the UPI payment framework is governed by the Reserve Bank Of India (RBI).
It is also unclear if the NCPI will allow IMPS for crypto trading. The crypto community still continues to stumble under a rock of uncertainty because the Indian government has been ambiguous and unclear in its communications regarding the policies that determine the future and the present of the digital asset.
Currently, India remains under a confirmed 30% tax and a 1% TDS on crypto. It has been a relief that India didn’t completely push for a ban but showed acceptance through a rigorous taxation framework imposed on the asset.
Due to NCPI’s vague and informal instruction, India’s trading volume experienced a major dip.
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