US based cryptocurrency exchange Coinbase plans to stop all services for users in India, the exchange has informed some customers through email. This development comes after the crypto exchange faced regulatory scrutiny by policy makers in India as well as the US.
Coinbase to discontinue services in India
As per the email sent by the crypto exchange, Coinbase would be discontinuing services in India after September 25. Customers have been advised to withdraw their funds from their accounts.
Business Today has reached out to Coinbase for comments on the same. The story will be updated as and when the company responds.
What can Indian customers do now?
The exchange's email advises customers to withdraw their funds from the exchange. This means customers can withdraw their funds and completely exit their crypto positions. If Coinbase users want to continue their crypto positions, they could link their account to other crypto exchanges and transfer their funds to exchanges which are still operational in India.
How did Coinbase reach this point?
Last year, Brain Armstrong, the exchange’s founder, visited India to officially launch the exchange’s services in India. The founder announced that Indian crypto users would be allowed to deposit funds via Unified Payment Interface (UPI).
This announcement received an immediate backlash from National Payments Corporation of India (NPCI).
UPI disabled across Indian crypto exchanges
NPCI put out a formal statement noting that it was not aware of the fact that Indian crypto exchanges were allowed to use UPI as a means for deposits by customers.
Their statement read, “With reference to some recent media reports around the purchase of Cryptocurrencies using UPI, National Payments Corporation of India would like to clarify that we are not aware of any crypto exchange using UPI.”
It is worth noting that UPI deposits were suspended across all exchanges, not just Coinbase after this development.
‘Informal pressure’ and ‘shadow ban’
Armstrong brought this up in his company's Q1 FY22 earnings call. He noted that his exchange faced “informal pressure” from the RBI and had to disable UPI deposits.
The crypto exchange founder said, “So a few days after launching, we ended up disabling UPI because of some informal pressure from the Reserve Bank of India, which is kind of the Treasury equivalent there.”
Armstrong also said that India is a unique market for crypto due to mixed response from regulators, policy makers, and other authorities.
“India is a unique market in the sense that the Supreme Court has ruled that they can't ban crypto, but there are elements in the government there, including at the Reserve Bank of India, who don't seem to be as positive on it. And so it's been called a 'shadow ban'. Basically, they're applying soft pressure behind the scenes to try to disable some of these payments, which might be going through UPI,” the crypto exchange founder noted.
Coinbase in India
Apart from its own exchange’s operations in India, Coinbase has presence in the country in other ways as well. The exchange has made significant investments in India crypto exchanges like CoinDCX and CoinSwitch Kuber.
Present state of crypto regulations in India
Indian regulators and policymakers have been trying to draw up regulations to protect retail crypto investors. Finance Minister Nirmala Sitharaman introduced a 30 per cent tax on crypto profits along with 1 per cent TDS on all transactions in February 2022, which became applicable from FY 2023.
Moreover, India has been pushing for uniform global regulations around crypto to prevent regulatory arbitrage. The G20 countries unveiled a Leaders’ Declaration over the weekend that said the nations endorse the Financial Stability Board’s (FSB’s) high-level recommendations for the regulation, supervision and oversight of crypto-assets activities and markets and of global stablecoin arrangements.
