India’s crypto landscape is undergoing a significant transformation with recent directives from the Indian parliament. The focus is on tightening control over foreign crypto exchanges, making adherence to strict anti-money laundering (AML) and counter-terrorism financing (CFT) regulations mandatory.
A total of 28 Offshore Virtual Digital Asset (VDA) service providers are on a registration journey akin to their foreign counterparts. Non-compliance with these regulations could lead to severe consequences for offshore exchanges.
Minister of State for Finance, Pankaj Chaudhary, confirmed these guidelines during a Lok Sabha session, emphasising the initiation of the registration process for VDA service providers. Notable entities already on the registry include Neblio Technologies Pvt Ltd (Coin DCX), Zanmai Labs Pvt Ltd (WazirX), Bitcipher Labs LLP (Coinswitch), Nextgendev Solutions Pvt Ltd (CoinswitchX), and Awlencan Innovations India Ltd (Zebpay).
Key players in the crypto world, including WazirX, Coin DCX, and Coinswitch, have officially aligned themselves with India’s Financial Intelligence Unit. Now designated as “reporting entities” under the Prevention of Money Laundering Act, these entities must conduct Know Your Customer (KYC) procedures for clients and platform users.
This regulatory measure extends to offshore crypto exchanges catering to the Indian market, emphasising the Indian government’s commitment to regulating crypto exchanges globally due to concerns about fraud and terror links.
India’s crypto strategy involves the swift implementation of the Crypto-Asset Reporting Framework (CARF), endorsed by the Indian government in September. Aligned with the G20 declaration, this framework aims to standardise crypto transaction tax reporting, emphasising enhanced data sharing and tax transparency for foreign financial accounts.
India’s Prevention of Money Laundering Act (PMLA) and KYC norms mark a crucial development in the country’s crypto landscape, establishing a new standard for compliance and regulatory expectations in the dynamic digital asset market. The Ministry of Finance clarified that offshore crypto exchanges serving the Indian market must register with the Financial Intelligence Unit-India (FIU).
In response to questions from MP Lavu Sri Krishna Devarayalu, Minister Pankaj Chaudhary affirmed that guidelines and reporting requirements apply to offshore crypto exchanges serving the Indian market. The registration process for Virtual Digital Assets Service Providers (VDA SPs) has commenced, with non-compliance leading to appropriate action under PMLA.
The recent trend of Indian crypto users shifting to global exchanges has prompted the government to enforce stricter regulations on offshore operators serving Indian markets. Mohnish Wadhwa, CEO of CapDeck Advisors, highlights the obligation for offshore exchanges to report any red flags related to Indian users.
As of now, 28 VDA service providers have registered with FIU-India, including popular exchanges such as Coin DCX, Unocoin, Zebpay, WazirX, and Coinswitch. Compliance with PMLA is deemed crucial for ensuring the safety and financial integrity of Indian citizens dealing with virtual assets. The government’s stance, evident through TDS provisions and PMLA requirements, indicates a growing emphasis on making offshore entities reportable to Indian regulatory bodies.