India’s government and central bank have received multiple proposals aimed at restoring access to the Unified Payments Interface (UPI) for the cryptocurrency industry. The UPI is a widely popular real-time payment system that saw approximately 74 billion transactions worth $1.5 trillion conducted in 2022. The recent push by India’s crypto stakeholders to seek policy changes comes on the heels of the industry facing a series of challenges brought on by harsh taxes, a crypto winter, and a “shadow ban” which cut off banking access to crypto exchanges.
One proposal, made by an unnamed Indian crypto exchange, cites the recent addition of crypto to India’s anti-money laundering rules as a reason to help secure virtual digital asset (VDA) transactions and arrest malfeasance. By being covered as “reporting entities” under the Prevention of Money Laundering Act (PMLA), crypto exchanges argue that these safeguards add legitimacy to the sector and warrant the removal of restrictions on the use of UPI services.
On the other side of the coin, legal experts point out that this development equips regulators with the power to oversee the industry for the first time. However, those advocating for the crypto industry maintain that adding crypto to the anti-money laundering rules is an essential step towards regulation.
A separate proposal, submitted by public policy advisory firm Black Dot to various authorities, argues that UPI’s seamless user experience encourages transactions to remain onshore while providing visibility for regulators and law enforcement. The proposal highlights that since the closure of UPI access, nearly 80% of digital asset transactions may be conducted on a peer-to-peer basis.
Black Dot’s proposal also raises concerns about potential violations of Article 14 (equality before the law), pointing out that arbitrarily denying a class of investors from accessing UPI for transactions, while other investors can access instruments like IPOs, leads to unequal treatment.
While it’s uncertain if authorities will restore UPI access to crypto exchanges, doing so would undoubtedly lend credibility to the space and make it easier for retailers to start or continue trading on crypto exchanges. While some aspects of the argument weigh in favor of the restoration of UPI access, the government and central bank must carefully consider the potential risks and regulatory implications as the industry evolves rapidly.
Source: Coindesk
