The Indian cryptocurrency market received another blow days after the government issued a 30% tax on related firms.
The blow comes after a global crypto behemoth, Coinbase, and an Indian mobile wallet, Mobikwik, announced halting support for Unified Payment Interface (UPI) as a payment option for cryptocurrency such as those found on Crypto Lists Ltd.
This move came after the National Payment Corporation of India (NPIC) refused to recognize Coinbase’s App crypto buying feature. The statement by Coinbase stated specifically that purchases with UPI had been temporarily suspended. This suspension comes barely a week after Coinbase announced allowing Indians to use UPI as a payment method when purchasing and selling crypto. Still, there are many other deposit methods for cryptocurrency sites in India – such as Apple Pay, Mastercard, Skrill and Visa.
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Information gathered from trusted sources indicates that Coinbase contacted UPI operators seeking clarity on the matter. After clarification, Coinbase stated that they would comply with regulators and that their work would be aligned with the company’s rules.
The sources also added that the uncertainty of crypto regulations in India also had a part in the NPCI’s post. This uncertainty has also triggered crypto exchanges using UPI through third parties responsible for online processing and managing merchants.
Collaboration with UPI
UPI is an instant system that facilitates bank-to-bank transactions via mobile phones. This system was developed by NCPI and has seen wide acceptance in India. Seeing that the system allowed users to transfer Rupees between banks via mobile phones, Coinbase saw an opportunity to make its Crypto exchange widely functional in India. This move could bring the crypto exchange giant closer to its goals to expand its business in the Indian market.
Coinbase’s Expansion Efforts in the Indian Market
CoinbaseIndia is a major market for expanding its business. The company even revealed details of tripling its headcount in the country before the end of the year 2022. The CEO, Brian Armstrong, disclosed that they are looking to have 1000 employees this year. The company was also planning to host a crypto community event in Bangalore to discuss the future of crypto and Web3 in India.
However, the stricter regulations imposed on the local exchanges seem to be a major roadblock to achieving their goals.
Effects of the Ban on India’s Currency World
While there’s nothing prohibiting the use of UPI to purchase crypto, associated firms are strongly avoiding confrontations over the issue in question with regulators. Banks also remain hesitant to be associated with players in the crypto industry.
While the announcement comes as a major disappointment to the crypto industry, it’s not surprising to the most involved parties. This is based on the current actions by the government regarding the crypto industry. Some of these actions include are:
A recent cut-off on digital currency usage due to AML rules caused Binance’s WazirX exchange to fall under scrutiny and tax raids.
Recently tax increase by the Indian government. It imposed a 30% tax on cryptocurrency. They, however, refused to state cryptos as a legal tender but continue to tax the industry without proper regulations. The government stated that investors wouldn’t have the ability to set off tax dues against losses incurred during crypto transactions. This announcement angered the entire industry, which prompted CoinDesk’s consideration to move to the Supreme Court.
Besides these actions from the government itself, the Reserve Bank of India has maintained an extremely tough stance toward crypto regulations. Even the central banks’ deputy governor suggested a complete ban on crypto, comparing it to Ponzi schemes.
While the government is positively not banning crypto, these strict regulations are hurting the industry’s growth.