Sources privy to the matter said the US-based company’s decision to allow customers to use the Unified Payments Interface (UPI) – a major digital payments railroad – to deposit money to buy cryptocurrencies in India is under regulatory scrutiny.
Ltd. started offering its trading services in India on Thursday, saying it is using UPI, which is managed by the National Payments Corporation of India (NPCI), to deposit rupees on its platform. However, NPCI in a statement issued on Thursday denied any knowledge of “any crypto exchange using UPI”.
“The banks had no clue. Some other smaller exchanges were also doing the same and banks blocked it. “Coinbase, due to its scale and much-hyped event on Thursday, has attracted everyone’s attention. It is now being investigated.” The person said that NPCI probably had to step in as there was still no clarity on the legality of cryptocurrencies in India. “After the clarification from NPCI, there is nothing left for the banks to do other than close these accounts,” the person said.
Responding to NPCI’s statement, a spokesperson for Coinbase said that the platform was “actively experimenting with multiple payment methods and partners to enable our customers to make their crypto purchases. UPI is one of these methods.” Easy to use and quick payment system.
“We are committed to working with NPCI and other relevant authorities to ensure that we are in line with local expectations and industry norms,” the spokesperson said.
Meanwhile, sources also said that fintech firm MobiKwik, which was facilitating cryptocurrency purchases through its wallet, had shut down the service amid regulatory uncertainty.
Mobikwik was one of the most used e-wallets for cryptocurrency transactions in India.
The company’s co-founder and chief executive Bipin Preet Singh also confirmed to ET that it has ceased offering the service for virtual digital assets, which include cryptocurrencies.
Legal experts said that currently no law prevents crypto exchanges from using UPI services for payments on their platforms as the Reserve Bank of India (RBI) or NPCI had not yet formally banned it.
“So, they are free to do so. However, the stance of RBI and NPCI on crypto has always been decidedly cold,” said Anupam Shukla, partner, Pioneer Legal. “The Indian banking ecosystem has also taken cues from this and An arms-length approach is maintained from the crypto sector. As a result of this (crypto) exchanges are able to offer only limited payment options on their platform.”
Several industry sources have alleged that Coinbase and other crypto platforms were using UPI so far without attracting regulatory attention, and this was the reason why NPCI was forced to issue a statement.
To be sure, Indian crypto platforms including CoinSwitch Kuber allow users to deposit rupees via UPI on their platform to buy cryptocurrencies.
operating in the gray zone
Since there is no law governing the operation of international crypto exchanges in India, Coinbase’s UPI transactions are being carried out through multiple UPI accounts.
ET has reviewed payment screenshots, including those of Delhi-based integrated payments and analytics platform Alikid Enterprises.
In response, Coinbase said, “It is our standard practice, as well as others within the industry, to work with multiple payment aggregators to deliver the best experience to users and create redundancy.”
Industry experts said that Eliquid Enterprises could act as a direct collection agent for Coinbase.
ET reached out to Alikid via the number listed on its website and email, but did not get a response till press time on Friday.
According to Shukla, there is currently no law that prevents international crypto companies from offering their services or employing direct collection agents in India. As of now there is no registration requirement for domestic or foreign exchanges.
During Thursday’s event, Coinbase co-founder and CEO Brian Armstrong said, “We know it won’t be a straight shot to bring this technology (into the field). We don’t know how it will develop but We are committed to working with bank partners, regulators, most importantly Indian people as they have shown genuine interest in cryptocurrency and a genuine desire to gain access to some of these services and products.”