Some of the biggest crypto exchanges operating in India have disabled the option to deposit fiat via the United Payments Interface (UPI) amid regulatory uncertainty after its operator denied knowledge of its use by crypto firms, Reuters reported, citing an industry source.
The list of exchanges includes Coinbase, CoinSwitch Kuber, and WazirX.
Authorities say crypto firms are not using UPI
UPI is a state-backed payment system for bank transfers that exchanges used to deposit fiat. However, in a recent development, the National Payments Corporation of India (NPCI), which operates the UPI, stated it was unaware that crypto exchanges were using the payments system.
Following NPCI’s statement, crypto exchanges disabled the option to deposit fiat and did not clarify when the service would return.
WazirX, India’s biggest exchange, tweeted that “UPI is not available,” and there is no timeline on a fix. The exchange later said in a statement that deposits through the service had been disabled since December 2021.
Coinbase is one of the affected crypto firms
Coinbase, which recently launched its operations in India, is also an affected entity. In its launch announcement, Coinbase CEO Brian Armstrong said:
“India has shown a great willingness with UPI.”
The chief product officer for Coinbase, Surojit Chatterjee, also added at the time that:
“UPI has made it very simple for anyone with a mobile phone to access digital payments.”
Coinbase’s mentions of UPI were quickly seen by the NPCI, which subsequently denied that any crypto exchange had used the state-backed payment network. The denial has led to regulatory uncertainty for the sector.
The Reserve Bank of India — the country’s central bank — regulates the NPCI and has historically had an anti-crypto stance. With the statement, there’s an increased regulatory uncertainty within the crypto sector in India.
Coinbase payment services in the country are no longer working which means any fiat deposit, conversion, or withdrawal is impossible. The exchange is yet to explain what’s going on to its users. Coinswitch Kuber is also one of the Indian exchanges where Coinbase has invested, and it’s also affected.
Stakeholders link current issues to India’s anti-crypto stance
Stakeholders in the industry have explained that the situation isn’t surprising. According to an anonymous industry source, the central bank may be influencing payment providers to stop offering services to crypto exchanges.
Others believe that Coinbase’s decision to discuss UPI led to the current situation. But given that the Supreme Court has overturned RBI restrictions on banks supporting or engaging in crypto transactions, others opine that Coinbase is within its rights to talk about UPI.
With the Indian crypto industry already facing high taxes, this regulatory uncertainty might further affect the sector’s growth.
CryptoSlate reported earlier that the transaction volume of Indian exchanges hit the lowest level in recent memory after the country’s controversial crypto tax rules came into effect on April 1.
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