Payment gateways avoid powering crypto exchanges given RBI reservations

Recently, NPCI had clarified that it is not aware of any crypto exchanges using UPI after Coinbase, America's largest crypto exchange said it has tied up with UPI

After crypto exchanges’ fiasco with Unified Payments Interface (UPI), wherein they had to disable rupee deposits through the payment platform, payment aggregators have also taken a conscious call to not power crypto exchanges and transactions. This comes in the wake of the central bank’s serious reservations around such assets.

Vishwas Patel, executive director of Infibeam Avenues, said: “Payment gateways are avoiding powering crypto exchanges. The payment gateways have not been working with the crypto exchanges for a long time, except for one or two small payment gateways.” 

He said it’s a conscious decision on their part because the Reserve Bank of India (RBI) has issues with cryptocurrencies and exchanges.

Keeping that in mind, banks and other players are also not allowing crypto merchants.

“None of the crypto excha­nges have payment gateways to power their transactions through credit card or debit cards. They are using IMPS and NEFT for their transactions.

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 added.

Recently, National Payments Corporation of India (NPCI) had issued a clarification that it is not aware of any crypto exchange using UPI, after Coinbase, America’s largest crypto exchange, said it has tied up with UPI.

Following the clarification, a slew of crypto exchanges that were giving the option of rupee deposits using UPI, disabled it.

Following NPCI’s clarification, a few banks that are shareholders of NPCI, have asked the payments’ body to come up with a formal directive on the usage of UPI for buying and selling cryptocurrencies, according to a report.

So far, the payments body, apart from the clarification it issued, has not come out with any formal circular barring the use of UPI for such transactions. An email sent to NPCI did not elicit a response.

“These exchanges use different names for merchant ID and use the payment services. Once that is closed down, they come up with other merchant IDs. While the government has decided to tax crypto transacti­ons, it has still not brought any legislation on the legality of cryptocurrencies”, Patel said.

RBI has time and again expressed its reservations against cryptocurrencies and called for a complete ban.

RBI governor Shaktikanta Das, post the February monetary policy meeting, warned that private cryptocurrencies pose a big threat to India’s macroeconomic and financial stability. He had said that they lacked the underlying value of even a tulip. This was a reference to tulipmania, one of the famous market bubbles and crashes of all time. This was when speculation drove the value of tulip bulbs to extremes in the 17th century.

Just days later, RBI deputy governor T Rabi Sankar, in a speech, said, banning cryptocurrency is perhaps the most advisable choice open to India.

On the issue that banning cryptos would lead to erosion of the wealth of investors, the deputy governor had said banning in India does not mean investors would lose money. This is because they can be pr­ovided with a reasonable exit.

The Centre — in this year’s Budget — proposed to tax income from crypto assets at 30 per cent and a 1 per cent tax deductible at source on all digital asset transfers above a certain size.