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FIU and Cryptocurrency Regulation

The FIU (Financial Intelligence Unit) plays a significant role in cryptocurrency regulation in India. According to India's Prevention of Money Laundering Act (PMLA), all Virtual Digital Asset Service Providers (VDA SP) must obtain permission from FIU IND and comply with its regulatory framework.

Main Regulatory Requirements

1. Licensing and Registration: All cryptocurrency businesses must register with FIU IND and obtain a licence.
2. Anti-Money Laundering Policies: Businesses must adhere to anti-money laundering policies, including substantial verification of user identity and maintaining reporting records.
3. KYC (Know Your Customer): Businesses must implement strict KYC processes, including collecting and verifying identity information (such as Aadhaar number and other authorized details).
4. Anti-Money Laundering Checks: Businesses must conduct thorough anti-money laundering checks to ensure users are not engaging in malicious and illegal activities.
5. Transaction Filtering and Monitoring: Businesses must have appropriate infrastructure to filter and monitor transactions, as stipulated by the PMLA.

Regulatory Actions

• In December 2023, FIU IND blocked the URLs of 9 leading offshore cryptocurrency exchanges, including Binance, Kucoin, and Huobi, for failing to comply with Indian PML laws.
• In 2024, Binance and Kucoin received licences from FIU, re-entering the Indian market, reflecting an increasingly positive attitude towards the industry.

Conclusion

FIU plays a critical role in cryptocurrency regulation in India, ensuring that all cryptocurrency businesses comply with anti-money laundering laws and relevant regulatory requirements. Businesses must obtain licences, implement strict KYC processes, conduct anti-money laundering checks, and filter and monitor transactions to ensure compliance.