Kotak Mahindra Bank has temporarily discontinued payments for trades with cryptocurrency trading platform CoinSwitch Kuber. It is not clear why the private lender has discontinued handling payments for the crypto intermediary now after initially resisting the urge to do so. While there is no fresh directive from the Reserve Bank of India (RBI), senior supervisory managers of the central bank have been asking banks to exercise caution, according to a report in Economic Times.
Kotak’s decision, shortly after digital wallet MobiKwik severed payments for crypto trades, is being seen as yet another blow to the crypto industry.
Just a few days ago Coinbase suspended the UPI payment option for its users after the National Payments Corporation of India (NPCI), which operates UPI, in a statement said it is not aware of any crypto exchange using UPI. NCPI released the statement after Coinbase had announced that will launch UPI-based crypto trading in India.
“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,” NPCI said in a statement.
It is to be noted that MobiKwik was the only payment option for crypto traders for many exchanges as most banks closed and had closed routes for crypto payments.
Several banks hoped to onboard Kotak Mahindra Bank as their payments partner as it was the only bank processing payments for CoinSwitch Kuber. Crypto intermediaries will have to look for other options now.
This is a tough time for the industry which is faced with a triple whammy of high taxes, legal hassles, and now no payment options for investors to continue trading.
From April 1, all income from the sale and transfer of virtual digital assets (VDAs) such as digital coins and NFTs will be taxed at 30%; also the Finance Minister in Union Budget 2022-23 proposed a 1% Tax Deducted at Source (TDS) on all crypto transactions. Also, investors cannot offset gains in one VDA against losses in another. A tough tax environment and lack of payment options will take a hard toll on the industry with an anticipated drop in volumes.
Starting from Governor Shaktikanta Das, topmost RBI and government officials have time and again voiced strong reservations against cryptocurrencies, resulting in banks distancing themselves from the industry.
