Synopsis
The Financial Intelligence Unit-India (FIU-IND) has mandated cryptocurrency exchanges to strengthen their KYC processes by June 30, adhering to the Prevention of Money Laundering Act (PMLA). Exchanges must update user details, initiate fresh KYC for accounts older than 18 months, and collect additional information from risky accounts.
New Delhi: The Financial Intelligence Unit-India (FIU-IND) has directed cryptocurrency exchanges to enhance their Know Your Customer (KYC) processes by June 30, in accordance with provisions of the Prevention of Money Laundering Act (PMLA).
The FIU has asked exchanges registered with it to update all user details and initiate fresh KYC where details are older than 18 months.
The FIU has also asked exchanges to expand the ambit of KYC and ask for additional details, especially with “risky accounts”. “We detected in many cases KYC processes were not strictly adhered to and also exchanges were not following TDS compliance (tax deducted at source) and we are strictly monitoring exchanges for any violations,” a senior official told ET.
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Some of these transactions where no TDS was collected were already under income tax lens, ET had reported on March 25. The official added that companies have enough time to comply.
“Complying to the PMLA law and strict KYC adherence is the first pre-condition of getting registration and we are closely monitoring the exchanges for any violations,” the official said.
He added that globally nations are taking KYC violations seriously as it defeats the collective effort to prevent use of crypto for money laundering and terror financing.
Major crypto exchange Binance, which was fined 18 crore last year by FIU for violating PMLA compliance have sent mail to their existing users requesting them to redo KYC process, including PAN card details.
“To enhance account security and meet anti-money laundering (AML) requirements, users in India, both new and existing, need to undergo their Know Your Customer (KYC) re-verification,” the crypto exchange said in its mail sent to platform users earlier this week. The crypto exchange had not asked for PAN details earlier.
It added that this requirement is “not unique to Binance and applies to all exchanges operating under Indian AML regulations” promising that data will be kept safe and secure. Another leading exchange Bybit is also asking its users for fresh KYC. The exchange settled a monetary fine of 9.27 lakh for non-compliance with local regulations in February this year to resume its operation in India.
Coinbase Global, another leading exchange, which recently got registered with India’s FIU and plans to launch their services for individuals later this year, is already finalising the regulatory requirement and officials said they had agreed to comply with KYC process.
In March 2023, the Ministry of Finance mandated that crypto exchanges operating in India must register with the FIU-IND and any crypto exchange operating without FIU registration can face enforcement actions, including penalties or shutdowns.
In 2022, the budget proposed to levy 30% tax on gains from virtual digital assets (VDAs).