Indian Banks Questions With An Official Note From NCPI On Crypto Ban UPI

In light of the recent events regarding the Unified Payments Interface restriction on cryptocurrencies, major banks have now requested a formal directive from the National Payments Corporation of India (NCPI).

The alleged “ghost ban” of cryptocurrencies has created a lot of speculation among major banks. This restriction went into effect solely on the basis of apparent instructions from the NCPI.

Since then, several banks have blocked UPI payments based on informal “verbal instructions” from the NCPI. The regulator is responsible for looking after the retail payments and settlement systems in India.

If published, the NCPI guideline should be able to clear up the great confusion that has arisen in the buying and selling of virtual digital assets with UPI.

Banks Request Formal Guidelines Regarding UPI Crypto Support

NCPI had been asking a lot of questions about the UPI method for payments related to digital assets, as cryptocurrency exchanges such as Coinbase, CoinDCX, and WazirX had started allowing UPI to buy and sell cryptocurrencies.

NCPI owns and is responsible for the operation of UPI, however, it does not govern it. Oversees and approves the participation of client banks, payment service providers, and third-party application providers, while dealing with prepaid payment instrument (PPI) issuers in the UPI payment structure.

Therefore, during the recent meeting, the Indian banks requested official instructions on their position on the UPI situation. There still doesn’t seem to be any clarity on the UPI issue as the NCPI has said there is “no intention to circulate” at this time.

Some of the banks that have raised concerns are also NCPI shareholders.

If there is an official circular to ban UPI for crypto or VDA, regardless of the nomenclature, the crypto industry would likely challenge it legally, as they did when the RBI imposed a ban in April 2018, a banker told The Economic Times.

Related Reading | Regulating Crypto Assets Is A Priority For India, Says IMF Official

Other gray areas

Bankers also raised many questions regarding NCPI’s authority to limit the use of UPI for transactions. This is so because the UPI payment framework is governed by the Reserve Bank of India (RBI).

It is also unclear whether the NCPI will allow IMPS for cryptocurrency trading. The crypto community continues to stumble on a rock of uncertainty because the Indian government has been ambiguous and unclear in its communications regarding the policies that determine the future and present of the digital asset.

Currently, India remains subject to a confirmed tax of 30% and a TDS of 1% on cryptocurrencies. It was a relief that India did not fully push for a ban, but showed its acceptance through a strict tax framework imposed on assets.

Due to vague and informal instructions from the NCPI, India’s trade volume has seen a significant drop.

Suggested Reading | Cryptocurrencies can be used to finance terrorism, says India’s finance minister

Bitcoin broke above its immediate price low on the four-hour chart. Image Source: BTC/USD on TradingView

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