An email sent out on March 16, 2018, by the most significant bitcoin exchange, Zebpay, explained, “You can send money to our registered banks using any of the UPI supported apps like BHIM, Google Tez, PayTM and PhonePe.”
The shift to UPI and other alternative payment methods comes in the wake of private and state-owned banks clamping down hard on cryptocurrency-related transactions.
Several major financial institutions in the country, including HDFC Bank and Citibank, recently sent out emails discouraging customers from purchasing digital currencies. Citing an increase in regulatory pressure, two Indian exchanges also permanently suspended all trading activity on their respective platforms a few weeks ago.
Speaking with the Indian finance publication Livemint, the co-founder of Koinex, Rahul Raj, said:
“UPI is actually one of the most favored methods of deposits on our platform as it is seamless. Since it is tied up with bank account and mobile number, and all crypto asset exchanges want deposits to come from linked bank accounts, it works for us. UPI is also a free method of deposit since there is no inherent charge for making a deposit. In all senses, it is convenient for the consumers considering both bitcoin exchange and UPI are mostly mobile only.”
Indian banks have also expressed their unwillingness to continue working with domestic cryptocurrency trading platforms. After ICICI Bank and HDFC Bank froze current accounts belonging to most exchanges, the companies were forced to move their business to smaller, lesser-known financial institutions.
Nevertheless, the co-founder of another local exchange, Unocoin, seems to be relatively unfazed by the banning of credit and debit cards for cryptocurrency purchases. According to him, the only ones affected are those looking to buy bitcoin or other altcoins from foreign exchanges. He said:
“Some people were using credit and debit cards to buy bitcoin, and Ethereum internationally using credit card and debit cards. Now, that has been stopped. The move affects only the customers who are trying to buy from exchanges abroad through credit card and debit cards.”
The status on fiat withdrawals remains unchanged, however, with cryptocurrency exchanges able to return user funds to any bank account without restriction.
Even though UPI has only recently become the go-to choice for these cryptocurrency exchanges, Coinome was the first to adopt the payment method in November 2017, shortly after it first opened its trading platform.
Given that Coinome is backed by the popular Indian payment gateway, Billdesk, the company has not been as adversely affected by banks withdrawing support.
As of right now, Indians looking to deposit fiat currency into cryptocurrency exchanges have the option of either using real-time gross settlement (RTGS), national electronic funds transfer (NEFT) and finally, universal payments interface (UPI).
While payment gateways are also available, the choice of banks is restricted to a tiny subset of those available in the country, presumably for the reasons mentioned above.