Indian crypto users struggle as UPI bars payments to exchanges
11:13, 18 April 2022
Prominent crypto exchanges in India have terminated the purchase of digital currencies through rupee deposits made through the government-backed payment system Unified Payments Interface (UPI).
CoinSwitch Kuber and WazirX blocked purchases via UPI after its operator, the National Payments Corporation of India (NPCI), stated it was not aware of the mobile payment system’s use by any crypto exchange.
Rupee/BTC volumes have tumbled as a result, with Coinhills reporting the Indian currency is now 11th in the world, after having been the seventh largest currency pair as recently as March.
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Exchanges confirm UPI bar
“UPI deposit is disabled for everyone and we are working on it to get it enabled back soon. Please be patient,” Coinswitch Kuber reportedly said in a tweet last week.
WazirX also told users on Twitter that UPI would not be available, and did not specify any time frame for the resolution of the issue.
Meanwhile, a report in the Financial Express said US-based crypto exchange Coinbase has removed the option of adding UPI as a payment method on its app.
The moves followed a 7 April statement by the NPCI: “With reference to some recent media reports around the purchase of Cryptocurrencies using UPI, National Payments Corporation of India would like to clarify that we are not aware of any crypto exchange using UPI.”
India’s April crypto tax
Last week, local cryptocurrency investors told Capital.com that they had dismissed Member of Parliament Sushil Kumar Modi’s call to increase the tax on crypto in India, from 30% to 50%, as a result of “ignorance” and unimportance because he is not part of the Finance Ministry.
The new tax rules came into force in April and now traders in the South Asian nation will pay a 30% tax on crypto on profits converted into Indian rupees. According to a report by Coindesk this drove a collapse in local exchange crypto volumes, a trend which the UPI ban has accelerated.
The Indian administration’s move to tax cryptocurrency profits at 30% was said to have effectively legalised a market that previously operated in a grey area. But the UPI payments bar presents a major barrier to actually trading cryptocurrencies.
According to local media reports, exchanges have resorted to using peer-to-peer (P2P) methods or direct bank transfers to sidestep the UPI issue.
2021: A breakout year in India
2021 was crypto’s breakout year, per a recent report by Gemini, a cryptocurrency trading platform with its own digital currency called the Gemini dollar.
41% of all owners surveyed globally purchased crypto for the first time in 2021. More than half of all investors in Brazil (51%), Hong Kong (51%), and India (54%) started in 2021.
Rising consumer prices, or inflation, is a prime driver for adoption, the report noted. Respondents in countries that have experienced 50% or more devaluation of their currency against the US dollar over the past decade ‘were more than five times as likely to say they plan to purchase crypto in the coming year’.
Nonetheless, regulation is a concern globally, it added. Among non-owners, 39% in Asia-Pacific, 37% in Latin America, and 36% in Europe highlighted the legal uncertainty surrounding cryptocurrency.
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