April 19, 2022
By Anjali Kochhar
The lack of regulatory clarity in India is going to do even more harm to the already dropping trading volumes at the country’s cryptocurrency exchanges, opines industry insiders, as they together demand more clarity on crypto payments from the authorities.
This came after crypto payments froze in India after many exchanges disabled support for payments made via the United Payments Interface (UPI) after the National Payments Corporation of India (NPCI) said that it was ‘not aware of any crypto exchange using UPI’.
The NPCI’s statement was in response to Coinbase’s claim that its users will be able to use UPI for buying and selling crypto on its platform.
Blockchain Asset Review spoke to several industry insiders to understand the implications of frozen crypto payments in India after Coinbase’s announcement.
Here is what they had to say:
“Even though UPI is the most convenient mode of transaction in India, the Reserve Bank of India isn’t in the favour of crypto regulations due to its volatility. Now given that all the mechanism is controlled by RBI driven NPCI which has issued a notice on 7th April of being not aware of any Crypto transactions are happening via UPI and it is hard to track the nature of transactions from the UPI – P2P model due to its tracking issues, crypto exchanges are doing away with the UPI feature as no one wants to clash with RBI,” Dileep Seinberg, founder and CEO of crypto messenger platform MuffinPay, told Blockchain Asset Review.
Similarly, Raj Kapoor, chief growth advisor at Acryptoverse, said, “the only viable option for buying these virtual assets is through peer-to-peer (P2P) transactions which can happen online or offline as these are still available as these were functioning even when the RBI had imposed a ban in 2018.”
“Coupled with the fact they are safe and P2P, it seems to be a re-emerging option. It is also going to be difficult for the Government to ban P2P transactions as it is the Constitutional right of citizens to buy or sell any services,” Kapoor told Blockchain Asset Review.
This has led to a drop in trading volumes at Indian exchanges, which were already experiencing a major plummet after the implementation of the crypto tax in the Finance Bill beginning April 1.
As to why this is happening, industry insiders believe that lack of regulatory clarity is becoming a barrier for the crypto industry, which is at a nascent stage in the country. While the government of India introduced taxation on digital assets in Budget 2022-23, experts believe that there are still grey areas that need to be addressed.
Shivam Thakral, CEO of Indian exchange BuyUcoin said, “We have seen a sharp decline in volumes (over 60-70%) compared to last year since April 1, but clear and supportive regulatory environment for crypto in India will lead to a new inflow of funds from accredited institutional investors along with fostering safe and secure retail trading.”
“Lack of clarity and confusion can hamper all major innovations and drastically reduce employment generation through the nascent crypto ecosystem of India,” Thakral told Blockchain Asset Review.
Similarly, Kapoor of Acryptoverse said, “Even though the initial regulatory mandate for crypto in India has been clarified significantly there seems to be enough wriggle room for interpretation as is evident from the reactions after NPCI’s comments.”
This has led crypto exchanges to take an overcautious way so as to not antagonise the regulators, Kapoor believed.
“The falling volumes and the 30% tax are sure to keep people away and we see an advent of “crypto Summers” walking in… And a possibility of. Flight of funds from our shores. We need complete clarity as there is still plenty of room for interpretation and too many grey areas, not to mention the fear of second-guessing – what next??” Kapoor told Blockchain Asset Review.
Piyush Gupta, the founder of crypto firm PolyTrade, believes that crypto trading won’t stop but, of course, the current scenario will hamper trading at Indian exchanges and people may move to foreign exchanges.
“The trading won’t stop as people are aware of the potential of crypto and blockchain technology which is why countries like the United Kingdom and the United States wants to be the first one to get into it,” Gupta told Blockchain Asset Review.
Thakral, on the other hand, said, “Global crypto players that are planning to enter Indian markets will face a major barrier to entry due to the lack of formal banking/payment channels for crypto trading in India, besides that they’ll also face stiff competition from established Indian crypto exchanges.”
“The current scenario of banking and payment channels for crypto trading is very hostile for investors and startups both. If we’re going to introduce a tax regime along with upcoming regulations for crypto investments, then we’ll need a complete overhaul in the existing relationships between banking channels and crypto exchanges,” he added.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.