(AF) India’s crypto trading sector has received an unexpected blow with the country’s largest lender, the State Bank of India (SBI), blocking the receipt of funds by crypto exchanges on its Unified Payments Interface (UPI ) platform.
The bank has asked payment processors to disable its UPI for crypto traders, according to The Economic Times.
Developed by the National Payments Corporation of India (NPCI), UPI is a Reserve Bank of India (RBI) regulated instant-payment system that allows instant transfer money between any two bank accounts.
The move effectively bars traders from buying any cryptocurrency by transferring funds through SBI’s UPI because none of the processors that handle funds for the exchanges will be able to receive money sent for crypto purchases.
It comes even after the Supreme Court last year overruled an RBI ban on on cryptos. Industry figures have reacted with anger.
“I think the biggest significance of this move lies in signalling,” said Ajeet Khurana, founder of Genezis Network, a thinktank for crypto-start-ups. “After the Supreme Court order last year, the industry thought that such a kneejerk reaction taken in the name of risk management would stop. But the SBI move signals that the bank is still unclear about its risk perception on crypto and that leaves a bad taste in the mouth.”
Experts said the decision is also confusing because it was expected the state-run lender would be less biased towards crypto than other banks.
“It is just surprising for us to see that SBI will not support crypto exchanges,” said Nischal Shetty, founder and CEO of WazirX, a crypto exchange that was also blocked by SBI.
While there have been no explicit directives from the RBI or the government to block crypto trading transactions, some banks and several payment gateways have taken an undeclared regulatory position, according to the Economic Tines report.
The National Payments Corporation of India, which developed UPI, too has abstained from blocking cryptocurrency transactions.
Nevertheless, while the SBI move raised the spectre of other banks joining SBI, the blockage may have little impact.
“As far as its impact on the industry; this would just be a mere inconvenience because all crypto traders have other payment channels at their disposal and they can shift there,” Khurana said.
Shetty added that while the SBI move has hindered Wazir X’s operations, “we are talking to the SBI to address its concerns and hope to get over this impasse soon,” he said.