Surojit Chatterjee had no idea what he was getting himself into when he got on stage at a Coinbase Global Inc. conference in Bengaluru, India, on April 7. The company’s chief product officer, Chatterjee, informed the audience that crypto investors will now be able to move funds to the country’s local exchange using the country’s online retail payments system.
The central bank-backed business that operates the system, United Payments Interface, said it was “not aware” of any crypto trade using the network hours after Chatterjee’s revelation. Coinbase has banned rupee transfers to its trading app via UPI within three days of the incident.
Coinbase clients were left without a way to fill their accounts with rupees as a result of the abrupt reversal, which harmed the company’s aspirations to expand in India. “We are dedicated to working with NPCI and other relevant authorities to ensure we are aligned with local standards and industry norms,” a Coinbase spokeswoman told Bloomberg on April 11 in a statement.
According to executives at the firms and local media reports, at least four additional organisations that provide crypto-related trading services have either ceased rupee deposits or seen banks and payment gateways drop support for money transfers onto their platforms since its announcement. Before the event, two other exchanges had lost support for rupee deposits from a payment service provider.
This is direct pressure on the already strained crypto market of the nation
According to exchange executives, these steps added to the strain on already declining trade volumes. The business is also preparing for a new tax on all crypto transactions exceeding a particular threshold, which will go into force on July 1. The government imposed a 30% tax on revenue from digital asset investments earlier this month.
Investors who sell their crypto assets on an exchange can keep their fiat money. In India, Coinbase already allowed consumers to trade crypto pairings without having to deposit rupees into their accounts.
According to co-founder Atulya Bhatt, local rival BuyUcoin has likewise ceased payments over UPI as a result of the NPCI notification.
According to Jaideep Reddy, a lawyer at Nishith Desai Associates who specialises in technology, restricting payment access without legal grounds amounts to unfairly singling out the digital asset market.
Payment gateways in India began withdrawing support after the Coinbase incident, according to Edul Patel, co-founder and CEO of algorithmic crypto trading business Mudrex. That happened to Mudrex as well, according to Patel, who declined to name the company’s partner in an April 12 interview.
He explained that the changes have an impact on more than just trading: In the previous two to three days, inflows into Coin Sets, a mutual fund-like crypto product offered by the Y Combinator-backed business, decreased by about half.
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