An Indian crypto exchange and a public policy advisory firm have separately submitted proposals to the government to restore access to the national Unified Payments Interface (UPI) for crypto firms.
According to a report citing sources familiar with the matter, the proposals have been sent to India’s central bank and government. Additionally, the Bharat Web3 Association (BWA), a newly-formed crypto policy advocacy group, is expected to submit a third proposal in the coming weeks.
Access to UPI was ostensibly suspended last year following a “shadow ban” that saw Indian payment processors cut off banking access to crypto exchanges.
Since then, India’s crypto industry has faced harsh taxes and a crypto winter, prompting stakeholders to push for policy changes. UPI, a popular real-time payment system in India, allows citizens to pay for goods using a QR code linked to their bank account.
It has seen rapid adoption in India, with approximately 74 billion UPI transactions worth $1.5 trillion conducted in 2022. Merchants are not charged any fee for accepting UPI payments, making it an attractive option for retailers.
The payment rail crisis seemed to originate from Coinbase’s introduction in India in April 2022, where company executives promoted the convenience of trading on their app with payments facilitated through UPI.
Following this, the National Payments Corporation of India (NPCI), responsible for overseeing UPI, publicly stated via a tweet that they had no knowledge of any digital currency exchange utilizing UPI.
Proposals From Indian Crypto Exchange & Policy Firm
One proposal to restore UPI access was made by an Indian exchange that asked not to be identified. The exchange submitted a representation to the NPCI seeking the removal of restrictions on the use of UPI services.
Another proposal was submitted by public policy advisory firm Black Dot, which argued that UPI’s seamless user experience encourages transactions to remain onshore and provides a visibility trail for regulators and law enforcement.
It is unclear whether authorities will restore UPI access to indian exchanges. However, doing so would lend credibility to the space and make it easier for retailers to trade on exchanges.
As per the report, these proposals was made shortly after, India added crypto to anti-money laundering rules in March 2023, making crypto exchanges, non-fungible token (NFT) marketplaces, and custody service wallet providers legally responsible for monitoring suspicious financial activities.
While some view this move as giving “more legitimacy” to the crypto industry, others remain divided on its impact.
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