Indian crypto exchanges have stopped accepting rupee deposits via Unified Payments Interface (UPI), which was widely used to make investments of as little as ₹100 in virtual digital assets (VDAs). Mint looks at the ways investors can deposit money on crypto platforms:
What’s the latest banking issue?
Crypto exchanges stopped allowing deposits via UPI after the National Payments Corporation of India (NPCI) last week said it was not aware of any digital asset platform using the service. This clarification was in response to US-based Coinbase Inc. announcing support to UPI payments. Subsequently, MobiKwik, whose services were used by major crypto exchanges, withdrew support to the exchanges. This is unlike in the past, when banks had denied access, said experts. This time, crypto exchanges have disabled deposits via UPI to ensure compliance with Indian laws and regulations, they pointed out.
How can Indians invest in crypto then?
India’s biggest exchange with more than 15 million users, CoinSwitch Kuber, has stopped all forms of deposits, while WazirX with more than 12 million users only allows net banking for rupee payments. Another major player, CoinDCX, allows net banking via IMPS, NEFT, and RTGS. However, users were quick to point out on social media the ease of access in the case of UPI deposits that is now lost. On CoinDCX, investors have to deposit at least ₹3,000 via net banking, while on WazirX only a few banks are supported. Redemptions and trading are working on all crypto exchanges via net banking.
Can banking services be denied to the exchanges?
A 2018 Reserve Bank of India (RBI) circular banning banking services to crypto business was quashed by the Supreme Court in 2020. The apex court ruled that banks cannot deny services to crypto exchanges as they have the right to conduct business. But RBI has often expressed its discomfort with cryptocurrencies, which has made lenders circumspect.
How long will the problem persist?
The issue is largely limited to UPI this time, unlike in May last year, when banking channels had shut down for businesses dealing in cryptocurrencies. The impact on investors is worse as UPI had become the backbone of crypto investments in India. Crypto exchanges are in talks with payment providers and banks to find a solution, according to industry insiders. CoinSwitch Kuber’s support handle on Twitter said deposits have been disabled to ensure compliance with all Indian laws.
What will be the impact on crypto exchanges?
Crypto exchanges earn fees on transactions. Already, trading volumes have dropped 50-70% across major exchanges since the beginning of April because of new taxation norms on crypto. There are fears that with payment options shrinking for rupee deposits, there could be another 50-70% drop in volumes, which could lead to a big fall in revenue for such firms. The industry may see massive layoffs or cost cutting. Drying up of fresh money, combined with a fall in trading volumes, is therefore a big setback for the exchanges.