'KYC' mandatory for cryptocurrency transactions

New Delhi: India has taken a major step to regulate cryptocurrencies, warning that cryptocurrencies could cause the next financial crisis. According to this, it has been made mandatory for everyone who deals in cryptocurrency, invests money in it and benefits from it to file ‘Know Your Customer-KYC’. Because of this, crypto traders will have to disclose their identities. Union Ministry of Finance has issued a notification in this regard. Due to this, transactions in cryptocurrencies have now come under the purview of the ‘Prevention of Money Laundering Act-PMLA’. It can make it much easier for systems to track down cryptocurrency abusers.

The Government of India and the Reserve Bank have consistently warned against transactions in cryptocurrencies. Do not invest in cryptocurrencies with the expectation of huge returns with low investment as these investments are not safe, the Reserve Bank of India Governor has warned Indian citizens. India has brought to the international community’s attention that cryptocurrencies are being used for many illegal activities ranging from the drug trade to funding terrorists. Also, India had warned that if the investment in cryptocurrency increases, it will challenge the country’s economic structure by creating an illegal and parallel economy. Considering all these dangers, experts informed that India is working round the clock to control cryptocurrency.

As per the notification issued by the Ministry of Finance, KYC will now be required for those who use the official currency for ‘Virtual Digital Assets-VDA’, invest in it, and transfer funds in it and other related transactions. Also, the Ministry of Finance has suggested that the middlemen dealing in this must maintain a record of at least five years. Apart from banks and financial institutions, real estate, jewellery businesses, casinos, etc., must keep records of all their transactions. It now includes transactions in cryptocurrencies. It will also enable the system to get information about transactions outside the country in the VDA. Also, it can monitor transactions from abroad into the country. It will be very important in terms of security.

Experts in the financial sector have expressed the belief that cryptocurrency will be regulated and its use for illegal purposes can be avoided. Some in the industry have claimed this is a positive step the government took towards recognising the cryptocurrency sector. In last year’s budget, the central government imposed a whopping 30 per cent tax on ‘VDA,’ i.e. profits from cryptocurrency transactions. Also, a ‘Tax Deducted at Source-TDS’ of one per cent was levied on the transactions in this. However, Union Finance Minister Nirmala Sitharaman said that imposing these taxes does not mean India is accepting cryptocurrencies. Also, the finance minister made it clear that the central government is keeping a watchful eye on cryptocurrency transactions. As of January 31 last year, the Enforcement Directorate (ED) had seized assets worth Rs 936 crore after arresting five people involved in cryptocurrency dealings. Now it seems that the central government has taken an important step towards controlling the transactions in VDA by implementing the KYC rule. International media has also taken note of this.

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