Mumbai: The going gets tougher for Indian crypto currency exchanges. The country’s largest lender, State Bank of India NSE 1.07 % (SBI), has blocked the receipt of funds by crypto bourses on its UPI platform. The bank has told payment processors to disable SBI UPI for crypto merchants, according to sources in the payment industry.
With this, traders cannot buy Bitcoin or any cryptocurrency by transferring funds via UPI, as none of the processors which handle funds for exchanges will be unable to receive money sent for crypto purchases on their SBI accounts.
UPI, or Unified Payment Interface, allows all bank account holders to send and receive money from their smartphones without entering bank account information or net banking user ID and password.
In the past six months, several banks have clamped down on fund transfers linked to crypto trades. After SBI’s recent decision, one of the few payment avenues left for crypto exchanges has been shut off.
“It is the policy of the bank not to comment upon matters relating to the subject matter,” said an SBI spokesman.
The largest domestic crypto bourse, WazirX, has already been impacted by the decision, with the processing agency following the directive of SBI. Industry circles said payment processors may stop accepting payment for other exchanges as well, unless SBI does a rethink.
When contacted, WazirX chief executive Nischal Shetty said, “We’re trying to discuss and put forward our points to SBI. WazirX follows KYC (know your customer) norms and AML (anti-money laundering) policies. Being the largest crypto exchange in India, millions of Indians are currently affected due to this move by SBI.”
Banks May take Cue from SBI
“We look forward to a positive resolution soon,” said WazirX’s Nischal Shetty.
With UPI blocked, many traders on WazirX are using one of the e-wallet services to transact.
But due to wallet charges and limits on fund transfer, traders prefer UPI in the absence of other payment modes like credit and debit cards, NEFT (national electronic fund transfers) and net banking.
After SBI’s decision, many banks may be reluctant to onboard crypto merchants on their respective UPI platforms.
Unstated Stance
While there has been no explicit direction from RBI to disallow payments for crypto trades, banks as well as several payment gateways have sensed the unstated regulatory stance on cryptos. In the course of meetings, RBI officials have voiced their reservations on cryptos, say senior bankers.
Significantly, the domestic umbrella body National Payments Corporation of India (NPCI), which developed UPI, has refused to block fund movements for cryptocurrency trades.
