India is working on creating an indigenous Virtual Asset Lab to identify unregistered and risky foreign crypto platforms. According to the report of the Financial Action Task Force (FATF), the Financial Intelligence Unit- India (FIU-India) of the Government of India, in collaboration with the Ministry of Home Affairs, has instructed social media platforms, web hosts and internet service providers to remove online content related to unauthorized foreign crypto platforms. So far 85 such URLs have been removed. There is a possibility of these unauthorized foreign platforms being used for illegal activities like money laundering.
Establishment of Virtual Asset Lab
FATF said that India is enhancing indigenous technical capacity to identify unregistered Overseas Virtual Asset Service Providers (OVASPs). For this purpose, work is going on to establish a Virtual Asset Lab. This lab will help in detecting such unauthorized crypto platforms through data analysis and internet monitoring. According to the report, India had imposed tax on income from crypto assets in 2022 and one percent tax deducted at source (TDS) was also implemented on its transactions. After this, a large part of the crypto asset business has shifted from registered platforms in India to foreign unauthorized platforms.
Binau is adding customers through KYC.
FIU-India said that many foreign platforms add Indian customers without adequate identity verification (KYC). These platforms use domestic payment channels like UPI or card networks for deposits while withdrawals are made to Indian bank accounts or wallets. According to the report, such business models show that many foreign crypto platforms are serving Indian customers even while avoiding Indian regulations and anti-money laundering provisions.
Multi-agency platform also ready
To deal with this, the Revenue Department has also created a multi-agency platform to coordinate on risks related to crypto assets in July 2023, which includes law enforcement agencies, intelligence agencies and regulators. Apart from this, FIU-India has also formed a taskgroup with local crypto service providers, banks and payment companies, which will create red flag indicators to identify suspicious transactions. At present, the responsibility of monitoring money laundering for virtual digital asset service providers in India has been entrusted to FIU-India.