With the latest freeze in Payment Options, Challenges mount for Crypto Exchanges in India
- ByStartupStory | April 16, 2022
A great wave of optimism to the Indian cryptocurrency industry, has been brought up by the 2022 Budget session. The crypto industry perceived it as official recognition, as a 30% tax on the transaction of virtual digital assets (VDAs) and 1% TDS on such transactions has been proposed by Finance Minister Nirmala Sitharaman. However, the industry is facing new challenges almost everyday, with time passing.
The crypto exchanges in India witnessed a massive downfall in trading volumes, with the new tax rules coming into effect on April 1. For the troubles that the crypto industry was awaiting, it was just the tip of the iceberg. After a Coinbase executive announced that to use UPI payment to purchase cryptocurrencies, the crypto exchanges came under the scanner of the National Payments Corporation of India (NPCI), the global crypto exchange would be allowed to users in India.
NPCI soon issued a clarification statement saying, NPCI would like to clarify that we are not aware of any crypto exchange using UPI, with reference to some media reports around the purchase of Cryptocurrencies using UPI.
Since then, several other crypto exchanges in India including Coinbase have disabled INR deposits via UPI in order to avoid any conflict with NPCI. Moreover, for crypto trades major Indian banks have also stopped providing their services reportedly.
According to crypto investors, all INR deposit services including UPI and bank transfers via NEFT, RTGS, and IMPS have been disabled by Coinswitch Kuber at the moment. Another major exchange WazirX, on the other hand, has also disabled UPI payment options but with a very limited list of supporting banks, it is allowing netbanking options. When contacted, at the time of publishing the article, both Coinswitch Kuber and WazirX did not respond.
The limitation to UPI options appears to be more damaging for them, while the freezing of netbanking options has also impacted the exchanges. UPI has become the lifeline of digital transactions in India, in the last few years. According to a CLSA report, as of FY21, UPI comprises 60% of total payments by volume, and digital payments have risen to $300 Bn from $61 Bn in FY16.
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