Banks seek formal NPCI note on crypto UPI curbs

economictimes.indiatimes.com:

Mumbai: Questioning the `shadow ban’ on cryptocurrencies, leading banks have asked the umbrella institution National Payments Corporation of India (NPCI) to spell out in a formal directive the curbs on the use of the popular money transfer tool ‘Unified Payment Interface’ to buy and sell the virtual digital assets (VDAs). Several banks have grudgingly blocked UPI for trading of cryptos following “verbal instructions” from NPCI which operates retail payments and settlement systems in the country. The banks, some of which are shareholders of NPCI, raised the issue at a recent meeting after the payments body expressed its reservations a few weeks ago on the fund flows through UPI for crypto trades, two persons aware of the discussions in the meeting told ET.

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UPI allows a bank account holder to send and receive money from their smartphones without the need to enter bank account information or net banking user ID and password. A formal communique from NPCI, however, seems unlikely any time soon. An NPCI official told ET that there are “no intentions of any circular”. According to senior bankers and members of the crypto community, NPCI’s reluctance probably stems from the legal complications that an official ban could result in. “If there is a formal circular to ban UPI for cryptos or VDAs, whatever is the nomenclature, the crypto industry in all likelihood would legally contest it — as they had done when RBI imposed a ban in April 2018,” said a banker. The ban was lifted in March 2020 when the Supreme Court set aside the RBI