The global crypto ecosystem is undergoing a series of changes to accommodate regulatory developments at a very fast pace. The rapid adoption of CBDCs, Bitcoin-based ETFs, NFTs, and decentralised finance has made crypto regulations a priority for the majority of countries around the world. While a few nations like UAE, Singapore, and Africa have emerged as global hot spots for crypto companies, countries like the US and India are still on their way to putting in place strong policy frameworks for the crypto industry.
The G20 summit held in India this year put crypto regulations on a pedestal and a series of discussions are planned during the year to create a global consensus for creating a homogeneous policy for the crypto industry. India took the lead in creating a roadmap that allows blockchain innovation to move forward without red tape and regulatory hurdles.
The latest in the series of regulations puts crypto entities at par with banks by bringing the crypto businesses under the Prevention of Money Laundering Act, 2022 (PMLA). The inclusion of crypto businesses will change the reporting and compliance for the companies and create a safety net around user funds.
Let’s take a look at the major changes:
Enhanced Compliance
One of the biggest changes is that crypto companies are now mandated to monitor all the transactions and client data and report suspicious transactions by registering with Financial Intelligence Unit (FIU India) and will be required to file SARs (suspicious activity reports) and STRs (suspicious transaction reports) which will ultimately lead to a better regulatory environment for crypto businesses.
Transparency
With all the transactions happening under the regulatory lens, the crypto industry in India is moving towards a highly transparent operating structure. Similar to banks, the entire crypto machinery will be subject to day-to-day scrutiny by authorities and in case of any stability concerns, regulators can take timely action to mitigate the risks.
Investor Protection
During recent events like the FTX collapse, it was observed that single-point failure led to a major loss of user funds and regulatory recourse was slow and less user-friendly. Users with insurance will also have to wait for some time before they can file their claims. With PMLA provision in place, investor protection will become the top most priority which will boost the confidence of retail and institutional investors.
Industry Reputation
Under PMLA, crypto entities are equivalent to banks. Banks are as old as modern human civilization and putting crypto entities in the same bracket will create an unparalleled reputation for the crypto industry. Investors will now perceive crypto companies and organizations as highly compliant ecosystems which will support them with regulatory recourse in case of any crisis.
Since the historic judgment by the honourable Supreme Court of India in March 2020, crypto regulations have been in a grey area. The series of measures taken by the government like a formal tax regime in 2022 and PMLA in 2023 shows the intent of the government to regulate the multi-million-dollar crypto industry and unlock its full potential. India being the tech superpower of the world is poised to become the blockchain capital of the world and if nurtured by a healthy regulatory environment, India will achieve its dream of becoming a 5 trillion-dollar economy, sooner than expected.
(The author is the CEO of homegrown crypto exchange BuyUCoin)
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.