- The development comes in the wake of the denial of instant payment service UPI by NPCI.
- Exchanges are also witnessing a sharp fall in transaction volume after crypto taxes became effective.
- Sources claim exchanges are in talks with the government, pushing for a clear regulatory environment.
Indian crypto investors have been perplexed after they found out that their trading platforms had disabled deposit options for Indian rupees. CoinSwitch Kuber and WazirX, the two largest Indian crypto exchanges, stopped taking deposits from Indian investors on Tuesday citing regulatory problems, said media reports.
Sources claimed these exchanges are in talks with the government, asking for a clear regulatory environment. Until that happens, investors will not have the option to deposit in Indian rupees.
Denial of UPI services
At the root of the problem is the denial of Unified Payments Interface (UPI) service to crypto exchanges by the National Payments Corporation of India (NPCI), a central bank-controlled umbrella body with a variety of products in retail payments and settlement systems including UPI. NPCI denies services to crypto exchanges in line with the RBI stance that cryptocurrencies are not legal tenders in India so they can’t be treated as money.
The problem came to a head when NPCI refuted a claim made by Coinbase that Indian investors can use UPI for deposits in rupees. NPCI released a statement soon after the launch of the Coinbase trading service in India on April 7, saying it was not aware of any crypto exchange using UPI. It led to Coinbase halting the deposit option on Sunday, 3 days after its India launch.
Normal functioning of crypto exchanges became impossible after e-wallet MobiKwik also stopped services to Indian crypto users following the NPCI statement on April 7. MobiKwik and some other payment aggregators were using UPI and they were being used by crypto investors to bypass the NPCI moratorium on crypto exchanges.
Falling Transaction Volume
Indian crypto exchanges have been facing a sharp decline in transaction volume and domain traffic after the crypto taxes became effective on April 1, 2022. The Economic Times reported that on April 10, transaction volume had hit the lowest in the last six months and the fall was a steep 92-98%, normalized to last year.
With 15 million users, CoinSwitch Kuber is India’s first crypto unicorn. It was valued at $1.9 billion in a $260-million Series C funding round in October 2021. Binance-controlled WazirX is considered to be the largest Indian crypto exchange by volume. In 2021, it saw its volume soar to $44 billion while the number of its users jumped to 10 million.