Informist, Thursday, May 19, 2022

By T. Bijoy Idicheriah

Last week, Coinbase Chief Executive Officer Brian Armstrong blamed "informal pressure" from the Reserve Bank of India as the reason for the cryptocurrency exchange backtracking on using the Unified Payments Interface as a mode of payments in India.

Coinbase, which launched operations in India in April, had said payments using National Payments Corp of India's UPI platform were possible for transacting in cryptocurrencies. The announcement had created a flutter as National Payments Corp of India was incubated by the RBI, which has been very vocal about its opposition to cryptocurrency.

Hours later, National Payments Corp issued a statement that it wasn't aware of any cryptocurrency exchange that was enabling UPI payments, and Coinbase had to suspend its operations linked to UPI.

Armstrong's charge that the RBI has used pressure behind the scenes to scuttle its plan is surprising to say the least, as there has been nothing vague about the central bank's opposition to cryptocurrencies.

RBI Governor Shaktikanta Das has even gone to the extent of saying that cryptocurrencies don't have any underlying, not even tulip, in a direct reference to the tulip mania bubble of the 17th century.

The RBI had in April 2018 banned regulated entities from offering services to crypto platforms. However, the Supreme Court struck down the RBI circular on technical grounds.

In November, Informist had reported that the RBI governor had written to Prime Minister Narendra Modi, seeking a ban on private cryptocurrencies. Though the government proposed to bring legislation to ban private cryptocurrencies, it did not introduce it in Parliament.

There is nothing informal about the RBI's opposition to private cryptocurrencies and if payments players or regulated entities stay clear of crypto exchanges, it is not surprising.

Coinbase should have got its strategy correct by tying up with payments players to handle transactions before announcing its India operations.

It missed the bus on that, and has only itself to blame.

POLICY RATES

RBI'S LATEST FORECAST

RECENT RBI HEADLINES

* RBI Patra says inflation aim must track demand-supply dynamic changes

* RBI aggressively defending 77.50/$1 level now, banking source says

* Banking source says RBI to help gilt market in material, lasting ways

* Banking source says RBI off-cycle hike aimed at staggering rate action

* March CPI at 7% was higher than RBI expectation, says banking source

* Need to see each RBI action independently from now, says bank source

* Source says NBFCs will need fresh RBI OK for existing credit card ops

LATEST MPC MEET

* Spooked by CPI data, MPC wanted to anchor expectations, minutes show

* Repo rate hiked by 40 bps; CRR up by 50 bps from May 21

* Hikes CRR by 50 bps, to suck out 870-bln-rupee liquidity

* Rates, stance left unch, LAF corridor restored to 50 bps

* Introduces SDF at 3.75%, restores LAF corridor to 50 bps

* FY23 CPI inflation forecast raised to 5.7% from 4.5%

KEY LINKS
Reserve Bank of India 
Indian Ministry of Finance 
Securities and Exchange Board of India
Directory of Indian government websites
International Monetary Fund
US Federal Open Market Committee
Bank for International Settlements

End

US$1 = 77.7250 rupees

Edited by Avishek Dutta

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