The fight between India’s leading financial institution, the Reserve Bank of India, and the cryptocurrency industry is finally over. Brian Armstrong, co-founder and CEO of Nasdaq-listed Coinbase, said the company disabled UPI payments from its platform due to informal pressure from the RBI.
Armstrong also stated that the RBI and the government had been applying mild pressure to disable some of these payments. “India is a unique market in the sense that the Supreme Court has ruled that it cannot ban cryptocurrencies, but there are elements in the government there, even in the Reserve Bank of India, that don’t seem to be so positive on that. And they, in the press, it’s been called a “shadow ban” — they’re basically applying gentle pressure behind the scenes to try and disable some of these payments that might be going through UPI,” Armstrong said on the analyst call. after the results of the company.
Armstrong also said that this stance by the RBI was actually against the Supreme Court ruling. “My hope is that we will be living in India again in a relatively short time, along with a number of other countries where we are seeking similar international expansion. I think our preference is to really work with them and focus on the relaunch,” he said.
Coinbase had started its services in India in April this year. The company then said that crypto traders in India could sign up for the platform with their Aadhaar cards and use their United Payments Interface (UPI) accounts to buy and sell crypto on the app.
“Coinbase has a long-term plan to invest in India. The country has a lot of entrepreneurial and engineering talent and has shown a lot of willingness to embrace new technology,” founder and CEO Brian Armstrong said at an event in Bangalore. But within a few days, the company had to suspend payments through UPI.
After Coinbase’s foray into India, the National Payments Corporation of India (NPCI), which operates UPI, released a statement saying that they are not aware of any cryptocurrency exchanges using UPI. After the clarification, a large number of crypto exchanges that offered the option of rupee deposits using UPI, disabled it.
Following NPCI’s clarification, some banks that are shareholders of NPCI, the umbrella entity for digital payments in the country, requested the payment agency to submit a formal directive on the use of UPI to buy and sell cryptocurrencies, according to a report. However, to date, the payment agency, in addition to the clarification it issued, has not issued any formal circular that prohibits the use of UPI for this type of transaction.
Industry in a tizzy
The crypto industry in India has faced an uphill task as the regulatory body has time and again stated its mistrust of the business.
The RBI has time and again expressed its reservations against cryptocurrencies and has called for an outright ban. RBI Governor Shaktikanta Das, after the February monetary policy meeting, warned that private cryptocurrencies posed a major threat to India’s macroeconomic and financial stability, saying they lacked the underlying value of even a tulip. This was a reference to tulip mania, one of the famous market bubbles and busts of all time, when speculation drove the value of tulip bulbs to extremes in the 17th century.
Meanwhile, the industry has continued to face challenges in payment and settlement systems, with the recent hit being taxation and reports that the government is considering a 28 percent GST on crypto.
Attempts made to contact CoinSwitch and WazirX about Coinbase’s comments or about the shadow ban went unanswered.
After crypto exchanges disabled payment via UPI, payment aggregators also decided not to support crypto exchange transactions. In a previous interaction with commercial standard, Vishwas Patel, CEO of Infibeam Avenues, said: “Payment gateways are avoiding pushing crypto exchanges. Payment gateways have not been working with crypto exchanges for a long time, except for one or two small payment gateways.”
“Payment aggregators, networks and banks are licensed and regulated by the RBI. And, the RBI is against cryptocurrencies. Therefore, we stay away from crypto exchanges,” Patel added.
Executives representing the industry say that in some cases even the NEFT and IMPS options have been disabled. “The RBI has informally asked banks not to transact with crypto exchanges. And now the transactions are P2P. Even net banking has stopped for many exchanges,” said an industry insider on condition of anonymity.
If this wasn’t enough, the government also announced taxes. In the Budget for 2022-23, the government announced a 1 percent tax deduction at source. Any gains from crypto assets are now taxed at least 30 percent. And now there are reports that the government is also considering GST.
Aritra Sarkhel, director of public policy at WazirX, said of the possibility of the government considering a 28 percent GST for cryptocurrencies: “If we look at the current trends, it is visible that the movement in the crypto markets mirrors the other financial markets around. world level. For example, the Fed’s recent announcement to raise rates was followed by a market crash. Virtual Digital Assets (VDAs) are an asset class with varied use cases across industries. It is not similar to gambling or the lottery as it is being done.”
Sarkhel further added: “The industry is open to a dialogue with the larger GST council on such matters. It would be great if deliberations are held to keep VDA taxation in line with India’s treatment of other regular financial instruments and/or to assess the different use cases for tokens when making decisions on crypto taxation. It will also be essential to look at the global jurisdiction arguments over such a tax.”
Reference-www.business-standard.com