Disabled UPI due to ‘informal pressure’ from RBI: Coinbase
CEO Brian Armstrong says elements in govt, including RBI, who don’t seem positive on crypto
The tussle between the Reserve Bank of India (RBI) and the crypto industry is out in the open. Brian Armstrong, co-founder and chief executive of Nasdaq-listed Coinbase, has said that the company disabled the Unified Payments Interface (UPI) from its platform because of “informal pressure” from the RBI.
Armstrong also said that the RBI and the Indian government have been exerting soft pressure to disable some of these payment systems.
“India is a unique market in the sense that the Supreme Court has ruled that they can’t ban crypto, but there are elements in the government there, including at [the] Reserve Bank of India, who don’t seem to be as positive on it. And so they — in the press, it’s been called a “shadow ban” — basically, they’re applying soft pressure behind the scenes to try to disable some of these payments, which might be going through UPI,” said Armstrong in an analyst call post the company’s results.
Armstrong also said that this stance of the RBI is against the ruling of the Supreme Court. “My hope is that we will be live back in India in relatively short order, along with a number of other countries, where we’re pursuing international expansion similarly. I think our preference is really just to work with them and focus on relaunching,” he said.
Coinbase had launched its services in India in April this year. The company had then said that crypto traders in the country can sign up on the platform with their Aadhaar cards and use their UPI accounts to buy and sell crypto assets on the app.
“Coinbase has a long-term plan for investing in India,” Armstrong had then said at an event in Bengaluru. However, within a few days, the company had to disable UPI on its platform.
After Coinbase’s entry into the country, the National Payments Corporation of India (NPCI), which operates UPI, issued a statement saying that it was not aware of any crypto exchange using UPI. Thereafter, a number of crypto exchanges that were offering the option of rupee deposits using UPI disabled it.
A few banks, which are shareholders of NPCI, the umbrella entity for digital payments in the country, reportedly asked the payments body to issue a formal directive on the usage of UPI for buying and selling crypto assets. However, apart from the statement it issued, the payments body has so far not come out with any formal circular barring the use of UPI for such transactions.
An email sent to the RBI did not elicit a response till the time of going to press.
Crypto industry in a tizzy
The crypto industry in India has not had it easy with the regulatory body making its distrust in it known on more than one occasion.
The RBI has time and again expressed its reservations against crypto assets and called for a complete ban on them. RBI Governor Shaktikanta Das had, after the February meeting of the Monetary Policy Committee, warned that private cryptocurrencies pose a big threat to India’s macroeconomic and financial stability since they lacked the underlying value of even a tulip. This was a reference to tulipmania, the infamous market bubble when speculation drove the value of tulip bulbs to extremes in the 17th century. Besides the challenges the industry faces with respect to the payment
and settlement systems, and the tax announced during the Union Budget, there are now reports that the government is considering a 28 per cent goods and services tax (GST)
“THEY’RE APPLYING SOFT PRESSURE BEHIND THE SCENES TO TRY TO DISABLE SOME OF THESE PAYMENTS”
BRIAN ARMSTRONG CEO, Coinbase
on crypto assets.
Reacting to this, Aritra Sarkhel, director, Public Policy at crypto exchange Wazirx, said, “If we observe the current trends, it is visible that the movement in crypto markets mirrors other financial markets globally. For example, the recent Fed announcement of increasing rates was followed by a market dip.” He added, “Virtual digital assets (VDAS) are an asset class with varied use cases across industries. They are not akin to gambling or lottery, as is being made out.”
Sarkhel said the industry is open to a dialogue with the GST council on the matter. “It will be great if there are deliberations on keeping the taxation on VDAS in line with India’s treatment of other regular financial instruments and/or evaluate the different use cases of the tokens, while making decisions on crypto taxation.” He added, “It will also be essential to look at arguments in global jurisdictions on such a tax.”
Crypto exchanges Coinswitch and Wazirx, however, did not respond to questions on the Coinbase CEO’S remarks.
Meanwhile, with crypto exchanges disabling UPI, several payment aggregators have decided not to support transactions involving these exchanges. In an earlier interview to Business Standard, Vishwas Patel, executive director of fintech Infibeam Avenues, had said: “Payment gateways are avoiding powering crypto exchanges.” Except for one or two small payment gateways, he said, the others had not been working with crypto exchanges for a long time.
“Payment aggregators, networks and banks are licensed and regulated by the RBI. And, RBI is against crypto. So, we are staying away from crypto exchanges,” Patel had said.
Executives representing the industry said that in some cases, even the NEFT and IMPS options have been disabled. “The RBI has asked banks informally not to transact with crypto exchanges. And now the transactions are P2P (peer-to-peer). Even net banking has stopped for many exchanges,” said an industry insider requesting anonymity.