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National Payments Commission of India (NPCI) not to ban cryptocurrency transactions in India

National Payments Commission of India (NPCI) not to ban cryptocurrency transactions in India

CONTEXT:

  • National Payments Corporation of India which runs UPI in India has refused to ban cryptocurrency transactions.

KEY DETAILS:

  • Onus on banks: NPCI has refused to ban cryptocurrency transactions, putting the onus on banks whether to ban transactions of cryptocurrency trades or not.

    • It told banks to take a decision based on the advice of their legal and compliance departments.

  • The NPCI’s advice is significant at a time when many banks are restricting payments for cryptocurrency deals.

  • Almost half-a-dozen banks have directed payment gateway operators to blacklist merchants involved in the trade of cryptocurrencies.

  • These banks restrict customers from using online fund transfer methods such as net banking and UPI to trade cryptocurrencies.

Significance:

  • Investor Friendly: NPCI’s decision to restrict payment for cryptocurrency trades on UPI and RuPay cards would invariably be applied across all bank.

    • And investors would be left with very little option to conduct such trades.

  • Allow trade: Users of banks which have disallowed crypto trades cannot use UPI, net banking or cards but trades continue as some banks still allow it.

    • But it remains uncertain for how long it will continue.

Supreme Court’s order on cryptocurrencies:

  • NPCI’s decision is based on the Supreme Court’s March 2020 ruling.

  • It set aside a directive by the Reserve Bank of India from April 2018 to ban banks and finance companies for “dealing in virtual currencies or providing services to facilitate” anyone trading in crypto.
  • NCPI has not blocked the trades given that the RBI did not come out with any directive following the Supreme Court ruling.
  • Each bank has a different take on crypto trades based on its risk assessment.

National Payments Corporation of India:
 

  • NPCI is a not-for-profit company formed by various banks, with primary objective of providing cost-effective payment solutions to the banks. SPIRIT OF MUMBAI: Chak De India Aajma le BHIMKaDum with NPCI

  • NPCI is an umbrella organization for all retail payments system in India.

  • It is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007.

  • It is regulated by RBI.

  • NPCI's solutions such as IMPS, BHIM,UPI, RuPay, AEPS etc. have indeed helped in financial inclusion. 

  • NPCI launched Rupay card in 2012, as 7th payment gateway in the world.

  • Further NPCI provided the linkages to ATM network in India.

SOURCE: Times now