Editor’s Note
The Finance Ministry has confirmed that 28 cryptocurrency exchanges are now registered with India’s Financial Intelligence Unit, with registration for offshore platforms ongoing. This marks a significant step in the formal oversight of virtual digital assets in the country.
On the first day of the Winter Session of Parliament on Monday, Minister of State for Finance Pankaj Chaudhary provided important information related to cryptocurrency in the Lok Sabha. The Finance Ministry stated that 28 crypto exchanges or Virtual Digital Asset (VDA) service providers have registered with the Financial Intelligence Unit-India (FIU-IND). According to Pankaj Chaudhary, the registration process for offshore crypto exchanges and VDA service providers is ongoing.
On December 4, the Minister of State informed Parliament that, in addition to registering in the country, offshore crypto exchanges must comply with Anti-Money Laundering and Counter Financing of Terrorism (CFT) guidelines under the Prevention of Money Laundering Act (PMLA). If offshore platforms do not follow the guidelines, appropriate action will be taken against them under the PMLA.
These 28 companies include names like CoinEx, Unocoin, Bitbns, ZebPay, WazirX, CoinSwitch, CoinSwitchX, and Rario. There are also crypto exchanges like Binance and Coinbase that are providing services to cryptocurrency users.
On the first day of the Winter Session, Lok Sabha MP Lavu Sri Krishna Devarayalu raised questions regarding the growing business of cryptocurrency in the country. He asked whether Anti-Money Laundering guidelines and reporting requirements apply to offshore crypto exchanges operating in the Indian market as well, and what the government is doing to regulate this risky financial asset to protect crypto investors.
This step by the government is a major relief for Indian crypto exchanges, as over the past few years, Indian crypto exchanges have seen a decline in trading volume on their platforms. Crypto users are choosing offshore exchanges in an attempt to avoid paying the 30% tax on income. In fact, a 1% TDS is levied on profits from Virtual Digital Assets (VDA) and on purchase and sale transactions exceeding 10,000 rupees.
In March 2023, the crypto or virtual asset industries were brought under the purview of the Prevention of Money Laundering Act, 2002 (PMLA). Under this, the Finance Ministry included Virtual Digital Assets (VDA) or crypto exchanges and intermediaries as reporting entities under the PMLA. Under the rules, crypto exchanges are required to report any suspicious activity to the Financial Intelligence Unit-India (FIU-IND). This made it mandatory for crypto exchanges that are Virtual Digital Asset Service Providers (VDA SPs) to conduct KYC of their platform users and customers. Entities falling under the PMLA’s reporting scope are required to maintain KYC details and other documents related to the financial transactions of customers and owners.