Last year, Indian cryptocurrency trading platforms CoinSwitch Kuber and WazirX were forced to shut down deposit acceptance through UPI due to regulatory uncertainty regarding such payments.
The U.S. marketplace Coinbase also had to suspend service to Indian users.
Due to the loss of access to UPI Black Dot has proposed to the Reserve Bank of India (RBI) to change the policy of regulating the cryptocurrency industry, which already has to overcome many obstacles, including increased taxes on crypto-assets.
The Black Dot team argues that unhindered access to UPI by crypto exchanges will provide greater transparency, as it will be easier for regulators to track suspicious transactions.
Black Dot officials cite a report indicating that after exchanges closed access to UPI more than 80% of transactions were conducted on a peer-to-peer basis.
In addition, arbitrarily denying a certain class of investors access to selected instruments through UPI while another group of investors has such access (e.g., participating in an IPO) violates the equality provisions of the law.
An anonymous cryptocurrency exchange said it filed a request with the National Payments Corporation of India (NPCI), a special division of the RBI under the country’s Ministry of Finance.
A new cryptocurrency industry advocacy group, the Bharat Web3 Association (BWA), is working on a similar request to remove restrictions on the use of UPI.
The request will go to the Indian government for consideration in the coming weeks.
Earlier this year, Indian Finance Minister Nirmala Sitharaman said the government would keep the current rules for the cryptocurrency industry in place for 2023.