In India, crypto exchanges have blocked functionality for payments made via the United Payments Interface (UPI) due to regulatory uncertainties.

Crypto investors in India will soon be able to send funds to Coinbase’s local exchange using the country’s online retail payments system, according to the company. The company’s chief product officer, Chatterjee, had no reason to expect the impending pandemonium.

When Surojit Chatterjee approached the stage on April 7 at a Coinbase Global Inc. conference in Bengaluru, India, he had no cause to expect the backlash that would shortly follow.

The central bank-backed business that operates the system, United Payments Interface, said it was “not aware” of any crypto trade using the network hours after Chatterjee’s revelation. Coinbase has banned rupee transfers to its trading app via UPI within three days of the incident.

Customers of Coinbase were left without a way to fill their accounts with rupees as a result of the abrupt reversal, which hampered the company’s progress in India.

“We are dedicated to working with NPCI and other key authorities to ensure we are aligned with local standards and industry norms,” a Coinbase spokeswoman told Bloomberg on April 11.

He told the crowd that crypto investors will now be able to send money to the country’s local exchange utilizing the country’s online retail payment system.

In an April 11 comment to Bloomberg, a Coinbase spokeswoman said, “We are committed to working with NPCI and other relevant authorities to ensure we are aligned with local expectations and industry norms.” The statement mentions the National Payments Corporation of India, which runs UPI.

It wasn’t just Coinbase that was harmed. Since the announcement, at least four other organizations that provide crypto-related trading services have either suspended rupee deposits or seen banks and payment gateways withdraw support for money transfers into their platforms, according to officials at the firms and local media sources.

These procedures, according to exchange executives, put a further burden on already falling transaction volumes. In addition, the corporation is planning for a new tax on all cryptocurrency transactions over a particular threshold, which will take effect on July 1. The government imposed a 30% tax on proceeds from digital asset investments earlier this month.

After cashing out their crypto assets on an exchange, investors can continue to withdraw their fiat currency. Coinbase already allowed bitcoin trading in India without requiring clients to fund their accounts with rupees.

The National Payments Corporation of India (NPCI), a joint venture between the central bank and the Indian Banks’ Association, is the country’s umbrella organisation for retail payments and settlements. Requests for comment did not receive a response. CoinSwitch Kuber momentarily stopped accepting rupee deposits via UPI and other banking methods on April 12, according to the Economic Times.

Slump in the Industry

According to exchange executives, these steps added to the strain on already declining trade volumes. The business is also preparing for a new tax on all crypto transactions exceeding a particular threshold, which will go into force on July 1. The government imposed a 30% tax on revenue from digital asset investments earlier this month.

Data from CoinGecko shows that daily trading volumes on Indian crypto exchanges, which serve roughly 15 million individuals, have fallen by 88% to 96% since peaking last year. According to the data, WazirX, India’s largest crypto exchange, saw volumes decline 93 percent from a high in October.

Investors who sell their crypto assets on an exchange can keep their fiat money. In India, Coinbase already allowed consumers to trade crypto pairings without having to deposit rupees into their accounts.

Coinbase wasn’t the only company hit. According to executives at the firms and local media reports, at least four additional organizations that provide crypto-related trading services have either ceased rupee deposits or seen banks and payment gateways drop support for money transfers onto their platforms since its announcement.

Before the event, two other exchanges had lost support for rupee deposits from a payment service provider.

Since the central bank urged lenders to stop partnering with digital asset companies in 2018, crypto-trading firms in India have had a rocky relationship with banks and payment service providers.

Despite the Supreme Court’s decision in 2020 to reject this direction, several banks have remained wary of working with the crypto sector, largely because senior Reserve Bank of India officials have publicly urged for cryptocurrencies to be prohibited.

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