Mint Explainer: Why India’s targeting Binance, other offshore crypto exchanges
Mint digs deeper into the issue. Virtual digital assets or cryptocurrencies are based on blockchain technologies, exist on decentralised networks, and are anonymous at the point of creation. This allows them to be outside the control of governments and centralised authorities.
Given the nature of cryptos, their use in laundering money has risen worldwide. Cryptocurrencies are used to facilitate payments for various forms of illicit activity including trade in drugs and other illegal goods. The Financial Action Task Force, the global anti-money laundering watchdog, issued the first global standards to address the money laundering and terrorist financing risks of virtual assets in June 2019.
India brought cryptocurrencies into the ambit of the anti money laundering/counter financing of terrorism framework of the PMLA through a notification issued on 7 March, 2023. The notification covered the exchange of VDAs for fiat currencies, exchange between one or more forms of VDAs, transfer of VDAs, involvement in and the delivery of financial services associated with an issuer’s offer and sale of VDAs, safekeeping, and administration of VDAs and instruments that enabled control over them. This was done to ensure that the Indian government could regulate and monitor crypto transactions.
On 4 July, India’s financial intelligence unit directed all crypto exchanges to register as reporting entities with it. As a reporting entity under the PMLA, the crypto exchanges have to ensure they adhere to the KYC norms, maintain records, report suspicious transactions, and have internal control procedures. As the government noted in its statement last week, the obligation is activity-based and not contingent on physical presence in India.
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