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NPCI refuses to ban cryptocurrency trades in India

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NPCI refuses to ban cryptocurrency trades in India:


National Payments Corporation of India (NPCI) has refused to ban cryptocurrency transactions.

  • Further, it has put the onus on banks whether to ban transactions of cryptocurrency trades or not. It told banks to take a decision based on the advice of their legal and compliance departments.

What is NPCI?

  • The National Payments Corporation of India (NPCI) serves as an umbrella body for the operation of retail payment in India.
  • This organization was established by the Reserve Bank of India along with the Indian Bank’s Association under the provisions of the Payment and Settlement Systems Act, 2007.
  • Presently, NPCI is promoted by ten major promoter banks.

NPCI can operate the following payment systems:

  1. National Financial Switch (NFS).
  2. Immediate Payment System (IMPS).
  3. Affiliation of RuPay Cards (debit cards/ prepaid cards) issued by banks and co-branded credit cards issued by non-banking financial companies (NBFCs) or any other entity approved by the RBI.
  4. National Automatic Clearing House (ACH).
  5. Aadhaar Enabled Payments System (AEPS).
  6. Operation of Cheque Truncation System.

Products of NPCI:

  1. RuPay.
  2. National Common Mobility Card.
  3. Bharat Interface for Money (BHIM).
  4. Unified Payments Interface (UPI).
  5. Bharat Bill Payment System.

Why has it refused to ban cryptocurrency trades?

NPCI’s decision is based on the Supreme Court’s March 2020 ruling which set aside a directive by the Reserve Bank of India from April 2018 to ban banks and finance companies for “dealing in virtual currencies or providing services to facilitate” anyone trading in crypto.

  • NCPI has not blocked the trades given that the RBI did not come out with any directive following the Supreme Court ruling.

What is a cryptocurrency?

Cryptocurrencies are digital currencies in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.

It works on blockchain technology.

Examples: Bitcoin, Ethereum etc.

Why is it in demand?

  1. Funds transfer between two parties will be easy without the need of third party like credit/debit cards or banks.
  2. It is a cheaper alternative compared to other online transactions.
  3. Payments are safe and secured and offer an unprecedented level of anonymity.
  4. Modern cryptocurrency systems come with a user “wallet” or account address which is accessible only by a public key and pirate key.
  5. The private key is only know to the owner of the wallet.
  6. Funds transfer are completed with minimal processing fees.


  1. The almost hidden nature of cryptocurrency transactions makes them easy to be the focus of illegal activities such as money laundering, tax-evasion and possibly even terror-financing.
  2. Payments are not irreversible.
  3. Cryptocurrencies are not accepted everywhere and have limited value elsewhere
  4. There is concern that cryptocurrencies like Bitcoin are not rooted in any material goods. Some research, however, has identified that the cost of producing a Bitcoin, which requires an increasingly large amount of energy, is directly related to its market price.


Prelims Link:

  1. Various cryptocurrencies.
  2. Cryptocurrencies launched by various countries.
  3. What is Blockchain technology?
  4. About NPCI.

Mains Link:

What are Cryptocurrencies? Why is there a need for regulation? Discuss.

Sources: Indian Express.