NPCI Refuses to Ban Crypto Trading in India

India has had a back-and-forth relationship with cryptocurrencies since the general public started taking an interest. However, in a brief sigh of relief for crypto enthusiasts, the National Payment Corporation of India or NPCI has refused to ban the transfer of money for trading crypto assets. This decision comes at a time when the Indian Parliament is in the process of drafting a bill titled ‘Cryptocurrency and Regulation of Official Digital Currency Bill,’ which seeks to criminalize all nature of dealing in digital goods.

NPCI regulates the Unified Payments Interface or UPI system in India, which is the de-facto mode of online transactions among Indians. In its verdict on May 6, 2021, NPCI transferred the onus of regulation to the banks themselves, allowing them to individually decide whether or not they want to allow crypto-related money transfers.

This decision enacts a Supreme Court of India ruling in March 2020, which overturned a directive set by the Reserve Bank of India or RBI in April 2018. The chief financial regulatory body had ordered banks and financial corporations to sever all ties with crypto companies. The currencies themselves, however, were not banned. Since the Supreme Court ruling, though, there has been no move by the RBI.

All legalese aside, sources say that close to half a dozen banks have cracked down on the crypto scene in India already. These banks have directed the payment gateway operators to blacklist merchants known for indulging in crypto trading. They have also started restricting online fund transfer services for users who are in violation of their regulations.

Therefore, despite NPCI’s favourable ruling, uncertainty looms among Indian investors. If a ban is imposed anytime now, either by any follow-up regulation or by the bill waiting to be enacted, it will apply uniformly to all banks. As of now, most of the country’s eight million-plus crypto enthusiasts have already started transferring to banks that allow crypto trading. Those who have stuck around have opted instead for slower NEFT or IMPS transfers to fund their crypto wallets.

Presently, cryptocurrencies operate in a sort of legal limbo in India. They are neither officially authorized nor regulated by any governing body. Outside of the devastating bill, which is rumoured to be introduced by the end of 2021, the finance minister of India, Nirmala Sitharam, clarified in a media event last month that India will not be “shutting all options” for crypto enthusiasts. She also added that the government plans to allow “certain windows for people to do experiments on the blockchain, bitcoins or cryptocurrency.”

These statements are not especially reassuring if the terms of the upcoming Cryptocurrency Regulation Bill are to be considered. If passed, it would make India the first major economy to impose a carpet ban against cryptocurrencies.

At present, Indian investors hold a total of 100 billion rupees or $1.4 billion in cryptocurrencies.

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