Crypto Exchanges, NFT Marketplaces, and Custody Service Wallet Providers Now Legally Responsible for Monitoring Suspicious Financial Activities
India has taken a significant step towards regulating cryptocurrencies by adding them to its anti-money laundering rules. This move imposes legal obligations on crypto exchanges, NFT marketplaces, and custody service wallet providers for monitoring suspicious financial activities.
New Obligations for Crypto Businesses
Crypto businesses must now comply with the Prevention of Money Laundering Act (PMLA) by registering with the Financial Intelligence Unit (FIU) and following other mandatory processes, such as performing Know Your Customer (KYC) verification and reporting any suspicious activities to the FIU. Additionally, these businesses are required to designate a Money Laundering Reporting Officer (MLRO) to ensure adherence to the act.
Jigsaw Law partner Shashi Jha said that “crypto enterprises would now have to mandatorily preserve transaction records connected to crypto business.” Previously, these organisations had to have a customer due diligence and record management policy in place. These businesses did not previously have a way to report suspicious transactions. They can now report to the FIU-IND any information about questionable activity.
New Role for the Financial Intelligence Unit
Although India lacks a regulatory body that is solely dedicated to crypto, the recent move assigns a substantial responsibility to the FIU for overseeing crypto in the nation. Until this point, crypto businesses were not under any legal obligation to conduct verification procedures, such as KYC. However, it is now mandatory as it has been incorporated into the law.
Impact on the Crypto Industry
Sumit Gupta, co-founder and CEO of crypto exchange CoinDCX, said that “looks like VDA [virtual digital asset] services providers are now effectively categorized as `reporting entities’ under the PMLA.” He added that his company had been voluntarily conducting these compliances for a while now, but he is happy to see that this has now been made into law.
India’s Stance on Global Coordination
India, serving as the current president of the Group of 20 developed nations this year, has consistently expressed that a regulatory framework cannot be established without global coordination. The country has led the G-20 towards awaiting a synthesis paper, jointly framed by the International Monetary Fund and the Financial Stability Board, to establish a global regulatory framework. The synthesis paper is anticipated to be available in September or October.
Conclusion
India’s decision to include crypto in its anti-money laundering rules signifies its efforts to regulate cryptocurrencies. This measure imposes legal obligations on crypto businesses, making them accountable for keeping an eye on dubious financial activities. Although India lacks a dedicated regulatory body for crypto, the move assigns the FIU a significant responsibility for overseeing crypto in the country.
