The Indian government and the RBI have received two proposals for restoring the crypto industry’s access to the Unified Payments Interface (UPI) which is a widely used real-time payment system in the country. "In the coming few weeks", a third proposal will also be made by the Bharat Web3 Association (BWA), which is a newly formed crypto policy advocacy group in India.
The adoption of UPI in India has increased rapidly since the pandemic. In 2022 alone approximately 74 billion UPI transactions worth around $1.5 trillion were conducted. The UPI system, which is used nationwide, allows the citizens to pay for goods and services using a QR code linked to their bank accounts.
The first proposal for restoring UPI access was made by an Indian crypto exchange which requested anonymity. "We have submitted a representation with the NPCI, seeking the removal of restrictions on use of UPI services," said the team behind the crypto exchange.
The proposal was made soon after India included crypto to anti-money laundering rules (PMLA or Prevention of Money Laundering Act), which made crypto exchanges, non-fungible token (NFT) marketplaces and custody service wallet providers legally responsible for monitoring suspicious financial activities in March 2023.
Crypto industry advocates were of the view that this gave "more legitimacy" to the sector because "adding crypto to anti-money laundering rules is some semblance of regulation," a senior industry participant said on Monday.
"Our submission highlights that Virtual Digital Assets (VDA) service providers are now covered as ’reporting entities’ under the PMLA and are also registered with the FIU (Financial Intelligence Unit). We believe that these guardrails go a long way in helping secure VDA transactions and arresting malfeasance, if any," the same crypto exchange's statement said.
The second proposal which was made in tranches over the past few weeks had come from Black Dot, a public policy advisory firm. It argued that the seamless user experience provided by UPI encourages transactions to remain onshore and provides a visibility trail for law enforcement.
The proposal also says "arbitrarily denying a class of investors from accessing instruments of their choice via UPI when another group of investors has access to their choice (e.g., IPO) may also violate Article 14 (equality before the law)."
The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash