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With Cryptocurrency Payment Options Frozen, The Industry Faces Numerous Challenges

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With Cryptocurrency Payment Options Frozen, The Industry Faces Numerous Challenges
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With crypto payment options frozen, challenges mount for the industry

The Union Budget 2022 ushered in a new era of hope for the Indian cryptocurrency industry. When Finance Minister Nirmala Sitharaman proposed a 30 per cent tax on virtual digital asset transactions and 1 per cent TDS on such transactions, the industry saw it as official recognition.

However, the industry has been confronted with new obstacles almost daily as time passed.

With the new tax rules taking effect from April 1, India’s crypto exchanges saw a significant drop in trade volumes, but that was only the beginning of the crypto industry’s problems.

A few weeks ago, after a Coinbase official revealed that the global crypto exchange would allow users in India to acquire cryptocurrency via Unified Payment Interface (UPI), the crypto exchanges were scrutinised by the National Payments Corporation of India (NPCI), which clarified that it wasn’t aware of any exchanges that used UPI.

So, to prevent a clash with the NPCI, several crypto exchanges in India banned INR deposits using UPI. In addition, major Indian banks, too, have stopped offering services for crypto trading.

Even though the Reserve Bank of India (RBI) or NPCI has issued no official directive, circular, or statement forbidding banks or other payment systems from providing services to crypto exchanges, the challenges faced by crypto exchanges have multiplied.

Since 2018, when the central bank issued a directive to lenders prohibiting them from cooperating with digital asset companies, crypto-trading firms in India have had a tense relationship with banks and payment service providers.

While the Supreme Court overturned that directive in 2020, some banks remained wary of working with the crypto sector because top RBI officials have repeatedly called for cryptocurrencies to be banned.

As a result of the traditional banking sector’s scepticism, payment gateways like MobiKwik had become a critical link between crypto exchanges and clients wishing to deposit fiat currency.

Now, after the NPCI’s stance on UPI, this option has been disabled, making it very hard for investors to purchase cryptocurrencies.

Shouldn’t the RBI publish an official circular on its stance on banks or payment systems providing services to crypto exchanges in such a scenario? 

If its official stance has changed, shouldn’t the RBI make a statement detailing the developments?

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