National Payments Corporation of India which runs UPI in India has denied banning crypto transactions. The domestic payments authority has instead asked banks to take a stand considering their risk assessment. The decision should be taken based on the advice of the banks’ compliance and legal departments.
The NPCI’s suggestion is important at a time when many banks are limiting payments for cryptocurrency deals. As per a report, nearly 6 banks have directed payment gateway operators to blacklist merchants involved in crypto trade. These banks confine customers from using online fund transfer methods like UPI and net banking for crypto trading.
NPCI’s decision to impose limits on payments for crypto trades on RuPay cards and UPI will always be applied across all banks. Further, investors will be having few options in hand to conduct such trades. Bank users who have disallowed cryptocurrency trades can’t use net banking, UPI or cards. But trades continue as some banks still allow it. But its continuity remains unpredictable.
NPCI’s decision is based on the Supreme Court’s ruling out in March 2020 which set aside a directive by RBI from April 2018 to ban finance companies and banks from providing services to facilitate anyone trading or dealing in digital currencies. NPCI hasn’t restricted the trades given that the Reserve Bank of India didn’t come out with any directive abiding by the SC ruling. Every bank has a different stand on cryptocurrency trading based on its risk assessment.
In the current situation, traders are either using less effective transfer alternatives like RTGS, IMPS or NEFT which are used rarely for forex, stock or commodity trading on exchange platforms or choosing other banks which allow crypto trades. If banks don’t support such trades, it will become difficult for investors to sell such assets.