India: Crypto exchanges are unregulated, but must register with FIU-IND to operate legally.

India: Crypto exchanges are unregulated, but must register with FIU-IND to operate legally.

Crypto exchanges in India are currently operating in an unregulated environment, as per the latest statements from the Ministry of Finance. The Minister of State for Finance, Pankaj Chaudhary, has clarified that crypto or virtual assets are not regulated in the country. This means that the legality or illegality of specific crypto platforms does not arise as of now [1].

However, to ensure oversight and compliance with anti-money laundering and counter-terrorism financing (AML/CFT) regulations, the Financial Intelligence Unit (FIU-IND) registers Virtual Asset Service Providers (VASPs) under the Prevention of Money Laundering Act (PMLA). This requirement applies equally to both domestic and offshore platforms catering to Indian users [1].

The government has also introduced a 1% Tax Deducted at Source (TDS) on the transfer of Virtual Digital Assets (VDAs) under the Finance Act, 2022. This tax applies to all transactions, including those involving offshore entities, if the income is chargeable to tax in India [1].

The Reserve Bank of India (RBI) has issued advisories warning users, holders, and traders of virtual currencies or crypto assets about potential risks, including economic, financial, operational, legal, and security concerns. These advisories are sector-wide and do not comment on individual platforms [1].

To combat tax evasion from VDA-related transactions, the government is utilizing data analytics tools such as the Non-Filer Monitoring System (NMS), Project Insight, and internal databases of the Income Tax Department. The analysis includes correlating available information on VDA transactions with those disclosed in the taxpayer's income return [1].

The government is also undertaking various capacity-building initiatives to equip officers for effective compliance monitoring and investigation of VDA-related transactions. Training programs, specialized workshops, and digital forensics training are regularly conducted by various training institutes and in partnership with the National Forensic Science University (NFSU), Goa [1].

References:
[1] https://economictimes.indiatimes.com/tech/technology/crypto-or-virtual-assets-not-regulated-in-india-mos-finance/articleshow/122818304.cms