India is reportedly reconsidering to let crypto investors use Unified Payments Interface (UPI) to purchase digital assets like cryptocurrencies and non-fungible tokens (NFTs). The financial authorities of India have received multiple proposals, urging them to allow the integration of UPI for crypto transactions. These proposals have been sent by crypto advocacy group Bharat Web3 Association (BWA). It is notable that this topic is being brought up now at a time when India is heading the formulation of global crypto rules under its ongoing G20 Presidency.
As part of these proposals to the Indian government, the crypto-advocacy group has pointed out that India’s crypto industry is reeling under high tax pressure as an aftermath of last year’s crypto slump. The country’s shadow ban on the sector severed the ties of traditional banks with crypto exchanges, causing inconvenience to the investor community. The development, citing anonymous sources familiar with the matter, was first reported by Coindesk on Wednesday, May 17
The UPI or the United Payments Interface is an instant online payment technology pioneered by India. Overseen by the NPCI, the UPI is an online payments mode in India, with over 300 million Indians reportedly using UPI to instantly transfer money from one account to another via apps such as BharatPe, Paytm, and Google Pay, among others.
In August 2022, when Coinbase announced that it was going to let Indian users purchase crypto on its app via UPI payments, the National Payments Corporations of India (NPCI) said it did not authorise Coinbase to provide this feature.
Amid regularity unclarity, the government of India as well as its central bank have not been very supportive of promoting crypto-related activities in the country.
After NPCI’s statement, Coinbase halted the release of the feature and to date it remains inaccessible to users.
With one tap, the UPI system lets users make instant peer-to-peer payments from banks or digital wallets. The system was introduced in April 2016, months after Prime Minister Narendra Modi demonetised many currency notes in India as part of financial restructuring.
Between then and now, India has very well adopted the UPI payment system with approximately 74 billion UPI transactions worth $1.5 trillion (roughly Rs. 1,23,56,962 crore) conducted in 2022 alone, as per Worldline’s report, India Digital Payments Annual Report for 2022
Indian authorities are hence exercising caution before allwoing UPI usage for crypto purchases, especially because the digital assets sector is largely unregulated and unstable, which could put investors at financial risks.
“Our submission highlights that VDA (Virtual Digital Assets) service providers are now covered as ‘reporting entities’ under the PMLA (Prevention of Money Laundering Act) and are also registered with the FIU (Financial Intelligence Unit). We believe that these guardrails go a long way in helping secure VDA transactions and arresting malfeasance, if any,” the Coindesk report quoted the source as saying.
The BWA comprises of several members of India’s corporate crypto community. The aim of this organisation is to open discussions with the Indian government around the dos and don’ts that will impact India’s budding crypto ecosystem.