1. India announced that anti-money laundering rules will include crypto.
2. Crypto businesses must register with FIU and comply with PMLA.
3. Virtual digital asset providers are now classified as “reporting entities.”

India has updated its anti-money laundering rules to include cryptocurrency, which means that businesses such as crypto exchanges, NFT marketplaces, and custody service wallet providers are now legally responsible for monitoring and reporting suspicious financial activities.

To comply with the new regulations under the Prevention of Money Laundering Act (PMLA), these businesses must register with the Financial Intelligence Unit (FIU) and follow other mandatory procedures. Although India currently lacks a dedicated regulatory body for crypto, the FIU will now play a significant role in overseeing the industry. Previously, crypto businesses were not required by law to perform verification processes like Know Your Customer (KYC), but this is now mandatory due to the recent regulatory changes.

As per the updated regulations, businesses dealing with cryptocurrency in India will need to voluntarily report any suspicious activities to the FIU, in addition to designating a Money Laundering Reporting Officer (MLRO) to ensure compliance with the Prevention of Money Laundering Act (PMLA).

These businesses are also required to establish a customer due diligence and record management program and maintain transaction records related to crypto business. Shashi Jha, a partner at Jigsaw Law, has confirmed these mandatory requirements for crypto businesses. He added,

Earlier there was no avenue to submit suspicious transaction reports for these businesses. Now they can submit details of any suspicious activity to FIU-IND.

India, which is currently presiding over the Group of 20 (G-20) industrialized nations, has been consistent in its stance that a regulatory framework for cryptocurrencies must be established with global coordination. The country has successfully steered the G-20 towards waiting for a global regulatory framework, which is expected to take the form of a synthesis paper jointly framed by the Financial Stability Board and the International Monetary Fund, to be released by September or October.

In light of the recent changes to India’s anti-money laundering rules, virtual digital asset (VDA) service providers have been effectively classified as “reporting entities” under the Prevention of Money Laundering Act (PMLA). While many providers have already been voluntarily complying with these regulations, Sumit Gupta, the CEO of CoinDCX, welcomed the formalization of these requirements into law. According to Gupta, the Bharat Web3 Association had previously asked for the industry to be brought under the PMLA.

Posted Date: May 26, 2023