Coinbase stopped the payment services on its platform just three days after the cryptocurrency exchange made it available in India. The largest U.S.-based exchange had used the Indian government's United Payments Interface (UPI) payment portal to make the service available to Indian users.

UPI is controlled by the National Payment Corporation of India (NPCI), which Coinbase used to facilitate the buy and sell orders for its service in the country. The NPCI was established as a special division of the Reserve Bank of India and managed by the Ministry of Finance.

Sources with knowledge of the matter said regulators may have suspended Coinbase's ability to use UPI for its services as it may not have gotten the proper authorization to use the payment portal. Last week, the NPCI said in a statement that it did not recognize the legal standing of Coinbase's use of its UPI portal.

In the statement, the NPCI clarified that it was not aware or was informed that any cryptocurrency exchange was using its UPI portal to conduct transactions.

Over the past few years, local and international crypto exchanges have been encountering regulatory hurdles in accessing the nation's financial infrastructure. Indian crypto traders are probably used to trading service accessibility being unstable given the numerous disruptions.

 The Indian government has so far failed to develop an appropriate regulatory framework for cryptocurrencies. On several occasions last year, the government had threatened to ban the use of digital currencies. However, the government never went through with its threats, and cryptocurrencies activities in the country continued.

Some Indian politicians have expressed their support for imposing a ban on cryptocurrency activities within the country. T. Rabi Sankar, the deputy governor of the Reserve Bank of India, previously expressed his support for a full ban. Other politicians who are not in favor of a ban have proposed other measures to take advantage of the boom in cryptocurrency activity. Last month, the nation imposed a 30% tax on all cryptocurrency trading, which is similar to the tax it imposes on gambling activities.

Last month, Coinbase Ventures, the company's investment arm, announced plans to spend $1 million on the Indian crypto and Web3 sectors. The exchange's service suspension does not appear to have had an impact on those plans. Coinbase said it is still committed to working with regulators and Indian authorities to ensure that it can continue to operate in the country and align itself with the nation's standards.