The Blockchain and Crypto Assets Council (BACC) has asked the National Payments Corporation of India (NPCI) to restore the UPI service to Indian crypto exchanges.
In a letter, it requested a meeting with the inter-bank retail payments and settlements body to discuss and understand its concerns around the crypto trade, media reports said.
“We asked for some time with the NPCI to understand their reservations and put forth our viewpoint to remove any misunderstanding,” a BACC source said.
In the letter, BACC has reportedly told NPCI that several of the crypto exchanges strictly follow user KYC and other NPCI protocols and asked it to restore the UPI service to such businesses.
BACC is a non-profit advocacy group under the Internet and Mobile Association of India (IAMAI). It has all major local crypto exchanges, including CoinSwitch Kuber, CoinDCX, and WazirX, as its members. In October 2021, CoinSwitch founder Ashish Singhal and CoinDCX co-founder Sumit Gupta were appointed as co-chairs of BACC.
What Is UPI?
UPI stands for Unified Payments Interface, and it’s a real-time inter-bank P2P and P2M payment system developed by NPCI. Launched in 2016, UPI had 150 million active users till May 2021, and it processed 68 billion transactions worth $460 billion till November 2021, becoming a successful mobile phone-based instant payment system.
The denial of UPI service is believed to be aimed at limiting Indian investors’ exposure to digital assets until a cryptocurrency regulation bill is adopted by parliament. NPCI is a wing of India’s central bank – the Reserve Bank of India (RBI).
India also has one of the harshest tax environments for the crypto sector. While gains from crypto transactions are taxed at 30%, there is no provision to offset losses against the profit. Besides, tax authorities are planning to raise the GST from the existing 18% to the highest slab of 28%.
Denial of UPI to Crypto Exchanges
In April, NPCI issued a statement saying it’s not aware that any crypto exchanges are using the UPI service. The clarification forced all major crypto exchanges to disable the “deposit” option in Indian rupees.
It also made payments companies such as MobiKwik that use UPI to process the payments stop offering their services to crypto businesses. All these developments resulted in a sharp fall in trading volume.