All Crypto Companies in India Must Now KYC Users

“KYC norms are no longer a best practice but a legal obligation,” one tech lawyer said about India’s latest directive for the crypto industry

article-image

Nirmala Sitharaman, Finance Minister of India | Shutterstock.com/PradeepGaurs, modified by Blockworks

share

India’s finance ministry announced Tuesday that it has applied money laundering provisions on crypto companies, forcing them to immediately align with the general finance sector.

A notification from the ministry was light on details, but showed the legislation has been applied to crypto trading, transfers of crypto, safekeeping or administration of crypto and provision of crypto.

Essentially, from now, crypto businesses will be required to supply know-your-customer (KYC) details in case officials ask for this information.

All crypto businesses will now be reporting entities to the Indian government, meaning businesses will be legally required to report suspicious transactions to the Financial Intelligence Unit. 

The directive follows calls from India’s IT ministry last year, encouraging crypto companies to keep five years worth of user data, including personal “Know-Your-Customer” information, to stay on regulators’ good sides.

Jaideep Reddy, counsel at Trilegal, broke down what the most recent move means for crypto businesses: “Technically the notification appears to come into effect immediately,” Reddy told Blockworks, and pointed out a shortcoming with the sudden announcement.

“A transition provision specifying a period within which compliance was to be achieved would have been ideal. However, one would expect that enforcement authorities would provide reasonable time to covered entities to become compliant.”

Reddy separately elaborated in a Twitter thread that crypto businesses will now be required to maintain reporting standards and KYC/AML norms to sync with other entities like banks, securities intermediaries and payment system operators. 

“In other words, KYC norms are no longer a best practice but a legal obligation,” he tweeted.

The move has been welcomed by some parts of the industry, which say it gives businesses some level of clarity as to what types of checks the government wants.

Reports emerged last year that crypto exchanges in India were being investigated by the Enforcement Directorate, which is responsible for fighting economic crime. WazirX, Coinswitch Kuber, CoinDCX and Zebpay were among exchanges approached by the directorate.

Loading Tweet..

The crypto landscape in India hasn’t been totally friendly. The government decided to retain the 30% tax imposed on crypto profits, on top of a 1% tax deducted at source (TDS), in its latest budget.

Offenders or platforms that don’t adhere to the TDS will be penalized under an amendment to Section 271C of the Income Tax Act. They could either be fined or jailed for terms lasting between 3 months to 7 years.

In October, the Financial Action Task Force (FATF) pushed for member nations to implement a “travel rule” that would track crypto transactions in order to block terrorist financing and other illegal activities. It isn’t clear yet whether India intends to enforce the travel rule.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

AERODROME TEMPLATE.png

Research

Aerodrome is a "MetaDEX" that combines elements of various DEX primitives such as Uniswap V2 and V3, Curve, Convex, and Votium. Since its launch on Base, it has become the largest protocol by TVL with more than $495M in value locked, doubling Uniswap's Base deployment.

article-image

The SEC has signaled a timeline to issuers that could lead to a July 23 launch for the ETH funds, people close to the process told Blockworks

article-image

PayPal has unequivocally made a name for itself as a crypto adopter among fintech giants

article-image

Also, a look into how the highly-debated SAB 121 could end up shaking out for crypto custodians

article-image

Vance, an Ohio Republican, is largely seen as crypto-friendly

article-image

Plus, all the world is green as prices across the crypto space rally, with solana reaching a nearly two-week high

article-image

Investors add to crypto positions after “turnaround in sentiment due to lower-than-expected CPI,” CoinShares research head says