The Reserve Bank of India (RBI), the State Bank of India (SBI), National Payments Corporation of India, and the Department of Financial Services were issued notices by the Delhi High Court against a petition seeking to remove barriers to UPI payments on cryptocurrency exchange WazirX, according to a report in The Hindu Businessline. The petition came up before a division bench of Chief Justice DN Patel and Justice Jyoti Singh which will next be heard on December 24, 2021, the report added.
The Respondent No 1 (SBI) is directly involved in the matter as they have blocked and restricted the users and merchants to use the UPI deposits option on the crypto exchanges, thereby leaving users with no option but to use other payment deposit options, which take more time to get completed and extra charges like convenience fees, GST charges or service charges are charged, making it difficult for retail investors and users to get the funds on time. — BusinessLine wrote while quoting the petition.
The plea also seeks a direction to the RBI to regulate and govern the cryptocurrency sector, thereby making provisions for payment interfaces, LiveLaw reported. The petitioner is represented by Advocates Siddharth Acharya and Simarjeet Singh Satia, LiveLaw revealed.
Cryptocurrency adoption has grown manifold in India ever since the Supreme Court struck down RBI’s circular. The ruling, however, did not resolve uncertainties surrounding the way banks deal with crypto exchanges which led to frequent outages and disabling of INR deposits and withdrawals. The decision, in this case, will be significant in resolving the matter once and for all.
Key takeaways from the petition
The petitioner, Arnav Gulati who is a law student and an investor, bemoaned that the blocking of UPI services does not uphold the Supreme Court ruling which struck down the RBI circular restricting all banks from engaging with entities dealing with virtual currencies, Bar and Bench wrote in its report.
The circular was challenged by the Internet and Mobile Association of India and was struck down as it did not meet standards of proportionality.
The petition argues that SBI’s decision is “arbitrary, hasty, absurd, unreasonable and irrational”, The Hindu Businessline reported.
“That the Respondent No 2 (RBI) and others clarified in their notices and interviews that there is no objection with the Unified Payment Interface (hereinafter referred as UPI) system in the cryptocurrency exchanges and, therefore, the petitioner has approached this court to directing the Respondent No 1 (SBI) to take effective steps and take back the decision of prohibiting UPI Payments in the crypto exchanges,” read the petition.
Timeline of crypto exchanges issues with Indian banks
April 2018: The Reserve Bank of India banned regulated entities including banks from providing services to crypto exchanges. It said that cryptocurrencies raise concerns of “consumer protection, market integrity, and money laundering, among others”.
March 2020: The RBI ban was overturned by the Supreme Court of India in 2020 which said that the move was “disproportionate”. It led to a surge in sign-ups across various crypto exchanges as they were able to access banking services.
April 2021: Indian cryptocurrency exchanges struggle as banks and payments gateways start cutting ties with them in order to not invite the ire of the Reserve Bank of India which asked them to steer clear of cryptocurrencies informally. Users across India complain of not being able to deposit money in their accounts.
May 2021: The Reserve Bank of India issued a clarification over banks blocking crypto transactions citing RBI’s notification. In its notification, the central bank has clarified that since the RBI notification vide April 6, 2018 that had banned banks from extending any services to crypto startups has been set aside by the Supreme Court, the same can no longer be cited by the banks for blocking crypto transactions.
July 2021: Crypto exchanges rush to secure viable, permanent payment solutions to ensure seamless transactions in the absence of banks. There is a lot of confusion as some banks continue to cite the order quashed by SC to refrain from doing business with exchanges. They face issues despite RBI’s clarifications.
September 2021: India’s largest bank, the State Bank of India (SBI), reportedly directed crypto exchanges to disable its UPI through payment processors. The bank blocked crypto traders from receiving funds via its UPI platform and has asked payment processors to disable SBI UPI on their platforms as well. The petition is making its case against this particular decision.
Also read:
- Cryptocurrency inches closer to mainstream acceptance with the first Bitcoin ETF in US
- PayPal launches cryptocurrency trading service in UK, Bitcoin and Ethereum among choices offered
- With SC Verdict, Cryptocurrency Exchanges In Indian Begin To Integrate Bank Services Once Again
- India ranks second in cryptocurrency adoption in the world: Report
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