According to reports, the State Bank of India (SBI) has prohibited payments to cryptocurrency exchanges using its Unified Payments Interface (UPI). Payment processors have been instructed to turn off the bank’s UPI for cryptocurrency businesses.
The country’s largest bank, State Bank of India, has reportedly “restricted the receipt of funds by crypto bourses on its UPI network,” the Economic Times said Wednesday, citing payments industry sources.
The National Payments Corporation of India (NPCI) created the Unified Payments Interface (UPI) to simplify interbank transactions over mobile phones. The Reserve Bank of India, India’s central bank, regulates and supervises the UPI payment system (RBI). According to the article:
This means that SBI bank clients cannot use UPI to send payments to cryptocurrency exchanges to purchase cryptocurrencies such as bitcoin. According to an SBI spokeswoman, “it is the bank’s policy not to comment on topics relevant to the subject matter.”
Several Indian institutions have restricted financial transactions to cryptocurrency exchanges. The NPCI, on the other hand, stated in May that it will not prohibit UPI payments to crypto firms. Instead, it recommended banks make their own decisions about whether to accept cryptocurrency transactions based on their own risk assessment.
Now that SBI has made its choice, many other banks may be hesitant to accept crypto merchants on their separate UPI networks, according to the website.
A Volatile Crypto Affair
The Reserve Bank of India (RBI) said in April 2018 that it would not engage with or offer any services to firms dealing with cryptocurrencies and that banks would have three months to settle their business with entities and customers dealing with cryptocurrencies.
Leading Indian banks, including HDFC, AXIS, YES, ICICI, and Kotak Mahindra, have stopped providing services to cryptocurrency exchanges and other businesses and dealers, resulting in revenue losses and interrupting exchange operations for numerous crypto firms.
Later, when the case was heard by the Supreme Court (SC), the apex court stated that the issue of cryptocurrency blocking did not fall under the competence of the central bank, nor could the RBI offer any proof of the harm done to banks by virtual currencies. As a result, the sequence was reversed in March 2020.
Again, in the first half of 2021, ICICI Bank and Paytm Payments Bank agreed to prohibit users from transacting with crypto exchanges. SBI followed suit, issuing a warning to its clients that using credit cards for crypto transactions may result in the suspension or termination of their SBI credit cards.
The block’s rationale was based on an informal RBI circular. As a result, the RBI directed banks to “stop blocking crypto exchanges,” providing relief to crypto investors. The central bank has also stated that it is developing a regulatory bank for digital currencies known as the Central Bank for Digital Currencies (CBDCs).
When SBI barred UPI transactions for crypto exchanges once again, the banks lifted restrictions on the acquisition of Bitcoin and other cryptocurrencies through their channels.
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