“Purchases with this payment method are temporarily unavailable,” Coinbase’s mobile application said on Sunday.
Screenshot of Coinbase mobile application.
The world’s largest crypto exchange, which announced its India entry through a
big-bang event held in Bengaluru on April 7, had come under the scanner of the National Payments Corporation of India (NPCI), which oversees UPI, after it said it would allow users to purchase cryptocurrencies using UPI. According to an industry source, Coinbase reached out to the NPCI after the UPI operator issued the statement saying it “is not aware of any crypto exchange using UPI”.
“They (Coinbase) reached out to NPCI following the clarification. But it means little as clearly cryptocurrency is not a legal tender in India. A regulatory body like the NPCI will not approve it unless it is officially legal,” a person aware of the matter said, adding that the regulatory uncertainty had also led to crypto exchanges using UPI via payment aggregators.
“Payment aggregators are partnering with exchanges and are operating through multiple merchant IDs (MID). Informally, they have been told about the current regulations, but there is business interest for them to process these payments for crypto,” this person added.
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Coinbase declined to comment. An email sent to the NPCI on Coinbase reaching out to it did not elicit any response till press time Sunday.
ET, citing sources aware of the matter, reported on April 9 that
Coinbase’s decision to allow clients to use UPI for buying cryptocurrencies in India had come under scrutiny of the NCPI. UPI is an instant real-time payment system developed by the NPCI to facilitate inter-bank transactions using a mobile phone.
Statement by NPCI as on 7th April 2022. With reference to some recent media reports around the purchase of Cryptocu… https://t.co/aiRkzXohz9
— NPCI (@NPCI_NPCI) 1649345668000
ET had reported that following NPCI clarification, banks had little choice but to stop accounts facilitating crypto-related payments.
But other Indian crypto exchanges continue to enable UPI-based transactions on their apps.
The Reserve Bank of India has maintained concerns over crypto and indicated in many instances that it should be banned. Given that, multiple sources told ET that aggregators and banks had been asked not to work with crypto exchanges. But, so far crypto exchanges have been able to find ways to continue working in India since the industry falls in a legal grey area.
“There is an understated rule for payment aggregators to avoid crypto exchanges, even after the new taxation regime was announced. All our (Payment Council of India) members are pretty much avoiding powering exchanges,” said Vishwas Patel, chairman of the Payments Council of India and founder of payment gateway service CCAvenue. “Crypto exchanges are known to keep changing and using different merchant IDs at different points of time. Everything is a cat and mouse game, wherever they find that their ID is getting blocked they move on to another one. So, this thing is a continuous process. We have a dedicated team at CCAvenue that keeps checking the seven-eight exchanges that are there,” he added.
When ET last week asked Coinbase whether it was keeping banks and the NPCI in the dark by using multiple UPI handles, it said: “We have had a number of meaningful conversations with regulators and believe we are operating within all reasonable expectations. We are committed to working with NPCI and other relevant authorities to ensure we are aligned with local expectations and industry norms.”
Banks are not aware immediately about the reason for a transaction as MIDs do not reveal that, and that is why Coinbase UPI was live in India before it formally announced it and then it caught regulatory attention, one of the sources said. “Payment aggregators also need to understand and take a cue from NPCI’s note last week to fully address the matter,” the source added.
ET reported on Saturday that fintech firm Mobikwik, which was facilitating cryptocurrency purchases through its wallet, had stopped the service amid the regulatory uncertainty. Mobikwik was one of the most used e-wallets for cryptocurrency transactions in India.
Meanwhile, even as Coinbase’s much-hyped launch has run into a controversy, its cofounder Brian Armstrong had multiple meetings to lobby for crypto in India. During his India visit, he met Niti Aayog CEO Amitabh Kant to discuss crypto and blockchain technologies.
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