The Indian government is stepping up efforts to regulate the cryptocurrency sector, an industry that continues to grow rapidly amidst global scrutiny. In a move to curb illicit activities and ensure transparency, 49 cryptocurrency exchanges have officially registered with the Financial Intelligence Unit (FIU) for the 2024–25 financial year. This step reinforces anti-money laundering (AML) measures and counters the misuse of cryptocurrencies in criminal activities.
Why the New Regulations Matter
The registration of these exchanges follows a rigorous review conducted by the FIU. This process involved analyzing Suspicious Transaction Reports (STRs) submitted by crypto platforms, uncovering repeated misuse of crypto funds for high-risk activities such as fraud, scams, gambling, and unaccounted peer-to-peer transfers. Alarmingly, some cases were linked to darknet services, terror financing, and child sexual abuse material—a stark reminder of the need for stringent oversight.
India’s Unique Approach to Crypto Oversight
Unlike several countries where multiple agencies oversee crypto activities, India has designated a single authority—the Financial Intelligence Unit under the Ministry of Finance—to monitor crypto exchanges. Out of the 49 registered exchanges, 45 are domestically based, while four operate overseas. This centralized approach ensures a streamlined regulatory framework and better compliance monitoring.
Compliance Obligations for Exchanges
As Virtual Digital Asset (VDA) Service Providers, crypto exchanges in India are subject to the Prevention of Money Laundering Act (PMLA). To comply, exchanges must:
- Maintain and submit transaction data periodically.
- Implement robust Know Your Customer (KYC) procedures.
- Report suspicious transactions promptly.
Failure to meet AML obligations results in substantial penalties. For instance, during the 2024–25 financial year, non-compliant platforms were fined ₹28 crore collectively by the FIU.
The Road Ahead for Crypto in India
Despite challenges, India recognizes the transformative potential of cryptocurrencies and blockchain technology in wealth creation and financial innovation. By reinforcing tax regulations and implementing withholding tax provisions under the Income Tax Act, the government aims to strike a balance between fostering innovation and mitigating risks associated with pseudonymous transactions.
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Conclusion
India’s strengthened regulatory framework reflects a proactive stance towards addressing the challenges posed by the cryptocurrency market. By integrating compliance measures and fostering fair competition, the country aims to create a safer, more accountable digital asset ecosystem. As the industry evolves, staying informed and complying with regulations will be key for both businesses and investors.
