India’s crypto industry is rallying for change as proposals pour in to reinstate access to the widely popular Unified Payments Interface (UPI) for crypto-related activities. Multiple sources familiar with the matter have revealed that both the Indian government and central bank have received these proposals, with the newly formed crypto policy advocacy group, the Bharat Web3 Association (BWA), planning to submit their proposal in the coming weeks.
These proposals mark a significant milestone as India’s crypto stakeholders unite to seek policy revisions after facing various challenges, including heavy taxation, a crypto winter, and a “shadow ban” that severed banking ties with crypto exchanges. UPI services were also suspended during this time.
Since the outbreak of the pandemic, UPI adoption in India has surged dramatically, with a staggering 74 billion UPI transactions totaling $1.5 trillion conducted in 2022 alone. UPI enables citizens to make seamless payments for groceries and other goods using a QR code linked to their bank account. Merchants are enticed by the absence of fees for accepting UPI payments, leading to nationwide adoption.
The UPI access setback for Indian exchanges can be traced back to Coinbase’s launch in the country. After Coinbase executives touted the ease of trading on their platform using UPI, the National Payments Corporation of India (NPCI), which governs UPI, swiftly clarified via Twitter that it was unaware of any crypto exchange utilizing UPI. NPCI operates under the oversight of the Reserve Bank of India (RBI).
One of the proposals to restore UPI access comes from an unidentified Indian crypto exchange, which has formally requested the removal of restrictions on UPI services through a representation submitted to NPCI. The submission was made shortly after India incorporated crypto into its anti-money laundering rules, making crypto exchanges, NFT marketplaces, and custody service wallet providers accountable for monitoring suspicious financial activities. This move has garnered mixed reactions, with some legal experts acknowledging the regulatory strengthening it brings, while crypto industry proponents see it as a step toward legitimizing the sector.
Another proposal, presented by public policy advisory firm Black Dot, has been shared with various authorities, including NPCI, RBI, and the chairperson for the Standing Committee on Finance. Black Dot’s proposal highlights how UPI’s user-friendly experience promotes onshore transactions and provides a traceable trail for regulators and law enforcement.
Notably, since UPI access was limited, approximately 80% of digital asset transactions have shifted to peer-to-peer channels, as reported by the Economic Times. The proposal argues that denying a specific group of investors access to their preferred instruments via UPI may potentially violate the principle of equality before the law.
While it remains uncertain whether authorities will restore UPI access to crypto exchanges, doing so would undoubtedly enhance the credibility of the crypto space and facilitate seamless trading for retailers. As the discussions continue, the future relationship between UPI and cryptocurrencies in India hangs in the balance, captivating the attention of industry participants and observers.