NPCI refuses to ban crypto, leaves it to banks

Mumbai: Unlike Visa and Mastercard, the domestic umbrella body National Payments Corporation of India (NPCI) has refused to block fund movements for crypto-currency trades. It recently told some of the banks to take a decision based on the advice of their respective legal and compliance departments.The stance taken by NPCI so far assumes significance at a time several leading banks are slowly choking payments connected to crypto deals. Half a dozen local banks have told payment gateway operators to blacklist merchants who are involved in buying or selling crypto-currencies — directly or indirectly. These banks have restrained customers from using online fund transfer facilities — like net banking and UPI — to buy and sell crypto-currencies.“If NPCI had taken a central decision to disable UPI and RuPay cards for investing in cryptos, it would have applied to all banks uniformly and left investors with fewer payment options. Customers of banks which have disabled crypto trades cannot anyway use facilities like UPI, net banking, or cards. However, trades continue to happen as many banks are still allowing. It’s unclear how long they would continue to,” said an industry official. 82422851NPCI’s decision is driven by the Supreme Court ruling in March 2020, when the apex court had set aside the Reserve Bank of India’s April 2018 directive banning banks and finance companies from dealing in “virtual currencies” or “providing services to facilitate” anyone “dealing with or settling” in such digital currencies. Since RBI did not come out with any directive following the (SC) ruling, NPCI as an industry level body has till now not blocked crypto transactions.“Each bank is deciding on the basis of its risk assessment and feedback from the respective SSM (senior supervisory manager assigned by RBI to a bank). The views of all SSMs are not always the same,” said a senior banker.According to Ashish Mehta, co-founder of the crypto exchange DigitX, following the Supreme Court directive, such exclusion (by banks) is not within the constitutional rights of the central bank or the banking industry. “Exchanges are service platforms which do not buy or sell any asset as such. They provide a marketplace to agreeing buyers and sellers in a secured environment so that a fair price can be arrived at. Denying or delaying support services to this area would be harmful for the entire economy,” said Mehta.Under the circumstances, investors are either moving to other banks (which are allowing crypto trades) or using comparatively less efficient fund transfer options like NEFT, IMPS, and RTGS which are rarely used for trades in stocks, forex and commodity futures done on exchange platforms.If banks block crypto exchanges as NEFT /RTGS counter-party, or more and more banks switch off crypto trades, existing crypto holders may find it tougher to sell their digital assets. While selling a decentralised currency to overseas buyers (under peer to peer deals) is technically possible, it would fetch a lower price, add to currency conversion cost, and raise questions from tax authorities as well as dealing with laws like FEMA.

from Economic Times https://ift.tt/3upDMdU