This leaves customers without any way of funding their trading accounts with rupees
When Surojit Chatterjee walked on stage at a Coinbase Global conference in Bengaluru, India, on April 7, he had little reason to anticipate the fallout that would shortly ensue.
Mr Chatterjee, the company’s chief product officer, told the audience that cryptocurrency investors would now be able to use the country’s online retail payments system to transfer funds to its local exchange.
Hours after Mr Chatterjee’s announcement, the central bank-backed entity that runs the system — called United Payments Interface — said it was “not aware” of any cryptocurrency exchange using the network. Within three days of the event, Coinbase had halted rupee transfers to its trading app via UPI.
The abrupt reversal left Coinbase customers without any way of funding their accounts with rupees, dealing a blow to its expansion plans in India.
“We are committed to working with NPCI and other relevant authorities to ensure we are aligned with local expectations and industry norms,” a spokesperson for Coinbase said in a statement to Bloomberg on April 11, referring to the National Payments Corporation of India, which operates UPI.
Coinbase wasn’t the only one affected. Since its announcement, at least four other companies that provide cryptocurrency-related trading services have either suspended rupee deposits or seen banks and payment gateways pull support for money transfers onto their platforms, according to executives at the firms and local media reports.
Two other exchanges had lost support for rupee deposits from a payment service provider before the incident.
Those actions put additional pressure on already falling trading volumes, exchange executives said. The industry is also bracing for a new tax on all cryptocurrency transactions above a certain size that will take effect on July 1. The government this month introduced a 30 per cent levy on income from digital asset investments.
Daily trading volumes on Indian cryptocurrency exchanges, which collectively cater to about 15 million people, has tumbled by between 88 per cent and 96 per cent since peaking last year, data from CoinGecko show.
WazirX, India’s biggest cryptocurrency bourse, saw volumes drop 93 per cent from an October high, according to the data.
Investors who cash in cryptocurrency positions on an exchange can still withdraw their fiat currency. Coinbase already offered trading in cryptocurrency pairs in India, which doesn’t require customers to deposit rupees into their accounts.
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