The Indian government and central bank have gotten proposals requesting the restoration of access to the Unified Payments
Interface (UPI) for the cryptocurrency industry, CoinDesk reports, citing sources familiar with the
matter. The proposals have been made
independently, with two already submitted and a third expected in the coming weeks
from the newly formed crypto policy advocacy group, the Bharat Web3 Association
(BWA).
These proposals mark the first
major effort by India’s crypto stakeholders to seek policy changes governing
the industry since it faced challenges such as harsh taxes, a crypto winter,
and a ‘shadow ban.’ The shadow ban resulted in
Indian payment processors severing banking access for crypto exchanges, and UPI
services were ostensibly suspended around the same time last year.
What is the UPI?
UPI is a revolutionary system that combines
the functionalities of multiple bank accounts into a single mobile application,
regardless of the participating bank. It seamlessly merges various banking
features, facilitates effortless fund routing, and enables convenient merchant
payments, all within a single platform. In essence, UPI consolidates and
streamlines diverse banking services, ensuring a comprehensive and
user-friendly experience for customers.
The UPI adoption in India has
experienced rapid growth, with approximately 74 billion UPI transactions worth
$1.5 trillion conducted in 2022. UPI allows citizens to make payments for
various goods and services using a QR code linked to their bank account.
Merchants are not charged any fees for accepting UPI payments, making it a
widely used system nationwide.
What Led to the Suspension of UPI Access?
The launch of Coinbase in India
seemed to have served as the catalyst for the suspension of UPI access for Indian cryptocurrency exchanges. On April 7, 2022,
Coinbase unveiled its operations in India, with company executives highlighting
the ease of trading on their app and utilizing UPI for payment processing.
However, the National Payments Corporation of India (NPCI), the regulatory body
overseeing UPI and operating under the supervision of the Reserve Bank of India
(RBI), swiftly responded to the event. Shortly after Coinbase’s announcement,
the NPCI took to Twitter to clarify that it had no knowledge of any crypto
exchange utilizing UPI services.
The Proposals
One of the proposals seeking
UPI access restoration was submitted by an unidentified Indian crypto exchange.
The exchange stated that they have approached the NPCI, requesting the removal
of UPI service restrictions. The proposal was made shortly after India added
crypto to its anti-money laundering rules, which made crypto exchanges, custody
service wallet providers, and non-fungible token (NFT) marketplaces, legally
responsible for monitoring suspicious financial activities.
The second proposal, submitted
by the public policy advisory firm Black Dot, emphasizes that UPI’s seamless
user experience encourages onshore transactions, providing a visibility trail
for regulators and law enforcement. The proposal suggests that arbitrarily
denying a class of investors access to their preferred instruments through UPI
while allowing access for other investors (e.g., IPOs) may violate the
principle of equality before the law.
It remains uncertain whether
authorities will restore UPI access to crypto exchanges. However, doing so
would enhance the credibility of the crypto space and facilitate trading for
retailers on crypto exchanges.
The proposals indicate the growing efforts to
address regulatory challenges and seek a more favorable environment for the
crypto industry in India. The outcome of these proposals will have a
significant impact on the future of cryptocurrency adoption and operations
within the country.
Crypto in India’s AML Rules
The recent inclusion of
cryptocurrencies in India’s anti-money laundering rules should rightfully spark divergent
views among experts regarding its significance for the country. This
development provides regulatory authorities with stronger enforcement
capabilities over the cryptocurrency industry, marking a pivotal moment in its
oversight.
The addition of crypto to the
Prevention of Money Laundering Act (PMLA) empowers regulators with enhanced
tools to monitor and supervise suspicious financial activities within the
crypto space. Conversely, proponents of the
crypto industry might perceive it as a step toward granting the sector greater
legitimacy, citing the act of integrating cryptocurrencies into anti-money
laundering regulations as a semblance of regulation.
The inclusion also marks a noteworthy shift
in the regulatory landscape, as it signifies a direct acknowledgment of
cryptocurrencies and their potential implications for illicit financial
transactions. By encompassing virtual digital asset (VDA) service providers as
“reporting entities” under the PMLA and ensuring their registration
with the Financial Intelligence Unit (FIU), one could argue that these safeguards
contribute significantly to securing VDA transactions and combating any
potential malfeasance.
On the other hand, advocates of
the crypto industry likely view the inclusion of cryptocurrencies in anti-money
laundering rules as a positive step toward bringing legitimacy to the sector,
especially following RBI
Governor Shaktikanta Das comments which are now somewhat being
echoed in the UK.
By subjecting crypto exchanges,
non-fungible token (NFT) marketplaces, and custody service wallet providers to
these rules, a degree of regulation is established, which lends
credibility to the industry. So, while legal experts might emphasize
the regulatory strenght this development brings, proponents of the crypto industry
might come to see it as a significant step toward legitimizing
cryptocurrencies through a regulatory framework.
Nonetheless, the divergence in
perspectives highlights the ongoing debate surrounding the role of regulation
in the crypto sector and its potential impact on fostering innovation, consumer
protection, and a secure financial environment.
As India continues to navigate
the evolving landscape of cryptocurrencies, the implications of integrating
them into anti-money laundering rules will undoubtedly shape the future
trajectory of the industry within the country. The contrasting viewpoints underscore
the need for ongoing dialogue and collaboration between regulatory authorities,
legal experts, and industry stakeholders to strike a balance between regulatory
oversight and fostering a conducive environment for the growth and development
of the crypto ecosystem.
The Indian government and central bank have gotten proposals requesting the restoration of access to the Unified Payments
Interface (UPI) for the cryptocurrency industry, CoinDesk reports, citing sources familiar with the
matter. The proposals have been made
independently, with two already submitted and a third expected in the coming weeks
from the newly formed crypto policy advocacy group, the Bharat Web3 Association
(BWA).
These proposals mark the first
major effort by India’s crypto stakeholders to seek policy changes governing
the industry since it faced challenges such as harsh taxes, a crypto winter,
and a ‘shadow ban.’ The shadow ban resulted in
Indian payment processors severing banking access for crypto exchanges, and UPI
services were ostensibly suspended around the same time last year.
What is the UPI?
UPI is a revolutionary system that combines
the functionalities of multiple bank accounts into a single mobile application,
regardless of the participating bank. It seamlessly merges various banking
features, facilitates effortless fund routing, and enables convenient merchant
payments, all within a single platform. In essence, UPI consolidates and
streamlines diverse banking services, ensuring a comprehensive and
user-friendly experience for customers.
The UPI adoption in India has
experienced rapid growth, with approximately 74 billion UPI transactions worth
$1.5 trillion conducted in 2022. UPI allows citizens to make payments for
various goods and services using a QR code linked to their bank account.
Merchants are not charged any fees for accepting UPI payments, making it a
widely used system nationwide.
What Led to the Suspension of UPI Access?
The launch of Coinbase in India
seemed to have served as the catalyst for the suspension of UPI access for Indian cryptocurrency exchanges. On April 7, 2022,
Coinbase unveiled its operations in India, with company executives highlighting
the ease of trading on their app and utilizing UPI for payment processing.
However, the National Payments Corporation of India (NPCI), the regulatory body
overseeing UPI and operating under the supervision of the Reserve Bank of India
(RBI), swiftly responded to the event. Shortly after Coinbase’s announcement,
the NPCI took to Twitter to clarify that it had no knowledge of any crypto
exchange utilizing UPI services.
The Proposals
One of the proposals seeking
UPI access restoration was submitted by an unidentified Indian crypto exchange.
The exchange stated that they have approached the NPCI, requesting the removal
of UPI service restrictions. The proposal was made shortly after India added
crypto to its anti-money laundering rules, which made crypto exchanges, custody
service wallet providers, and non-fungible token (NFT) marketplaces, legally
responsible for monitoring suspicious financial activities.
The second proposal, submitted
by the public policy advisory firm Black Dot, emphasizes that UPI’s seamless
user experience encourages onshore transactions, providing a visibility trail
for regulators and law enforcement. The proposal suggests that arbitrarily
denying a class of investors access to their preferred instruments through UPI
while allowing access for other investors (e.g., IPOs) may violate the
principle of equality before the law.
It remains uncertain whether
authorities will restore UPI access to crypto exchanges. However, doing so
would enhance the credibility of the crypto space and facilitate trading for
retailers on crypto exchanges.
The proposals indicate the growing efforts to
address regulatory challenges and seek a more favorable environment for the
crypto industry in India. The outcome of these proposals will have a
significant impact on the future of cryptocurrency adoption and operations
within the country.
Crypto in India’s AML Rules
The recent inclusion of
cryptocurrencies in India’s anti-money laundering rules should rightfully spark divergent
views among experts regarding its significance for the country. This
development provides regulatory authorities with stronger enforcement
capabilities over the cryptocurrency industry, marking a pivotal moment in its
oversight.
The addition of crypto to the
Prevention of Money Laundering Act (PMLA) empowers regulators with enhanced
tools to monitor and supervise suspicious financial activities within the
crypto space. Conversely, proponents of the
crypto industry might perceive it as a step toward granting the sector greater
legitimacy, citing the act of integrating cryptocurrencies into anti-money
laundering regulations as a semblance of regulation.
The inclusion also marks a noteworthy shift
in the regulatory landscape, as it signifies a direct acknowledgment of
cryptocurrencies and their potential implications for illicit financial
transactions. By encompassing virtual digital asset (VDA) service providers as
“reporting entities” under the PMLA and ensuring their registration
with the Financial Intelligence Unit (FIU), one could argue that these safeguards
contribute significantly to securing VDA transactions and combating any
potential malfeasance.
On the other hand, advocates of
the crypto industry likely view the inclusion of cryptocurrencies in anti-money
laundering rules as a positive step toward bringing legitimacy to the sector,
especially following RBI
Governor Shaktikanta Das comments which are now somewhat being
echoed in the UK.
By subjecting crypto exchanges,
non-fungible token (NFT) marketplaces, and custody service wallet providers to
these rules, a degree of regulation is established, which lends
credibility to the industry. So, while legal experts might emphasize
the regulatory strenght this development brings, proponents of the crypto industry
might come to see it as a significant step toward legitimizing
cryptocurrencies through a regulatory framework.
Nonetheless, the divergence in
perspectives highlights the ongoing debate surrounding the role of regulation
in the crypto sector and its potential impact on fostering innovation, consumer
protection, and a secure financial environment.
As India continues to navigate
the evolving landscape of cryptocurrencies, the implications of integrating
them into anti-money laundering rules will undoubtedly shape the future
trajectory of the industry within the country. The contrasting viewpoints underscore
the need for ongoing dialogue and collaboration between regulatory authorities,
legal experts, and industry stakeholders to strike a balance between regulatory
oversight and fostering a conducive environment for the growth and development
of the crypto ecosystem.
