Crypto Regulations: How To Uphold Standards In The Virtual Digital Asset Space

A collaborative approach involving policymakers, industry stakeholders, and regulators is essential to address the evolving needs of India's crypto industry and foster sustainable growth.

By Sumit Gupta

The crypto ecosystem in India is undeniably experiencing growth, but what truly sets this expansion apart is not merely the increase in the number of exchanges or investors or the volume of transactions. Rather, it's the significant shift towards compliance and regulatory oversight that is reshaping the landscape. 

The recent approval by India's Financial Intelligence Unit (FIU) to register offshore crypto exchanges Binance and Kucoin as Virtual Asset Service Providers (VASPs) marks a pivotal moment in India's crypto journey. This move not only expands the options available to Indian investors but also signifies a new era of regulatory compliance within the crypto industry.

Amidst questions from both the community and the media regarding the implications of the entry of offshore exchanges, it's important to understand that leading exchanges in India view this development as a positive one. The entry of more exchanges into the Indian market is not seen as a threat, but rather as a welcomed opportunity for growth and innovation. It signifies a maturing of the market. While users now have a broader array of options, investors are advised to select an exchange that is a long-term commitment to the industry.

Here are five key points that investors must consider when selecting a crypto exchange: Compliance and FIU-IND Registration: Ensure the exchange is FIU-IND registered and follows India's regulations, including PMLA guidelines, to avoid risks of government blockages and ensure fund safety. Security: Be cautious of fake websites mimicking popular exchanges. Verify the URL before creating an account or making investments to avoid being exploited by fraudulent platforms. Transparency: Choose exchanges that publish Proof of Reserves and Liabilities and provide clear explanations on how they select new tokens. Opt for platforms with a track record of at least five years. Liquidity: Select exchanges with high trading volumes and popular trading pairs to ensure smooth transactions, quick buys/sells, and minimise price slippage. Fees and Customer Support: Understand the exchange's fee structure and prioritise those with robust customer support. Look for platforms that actively engage with users through channels like Telegram and Discord for a better experience.

India's crypto market is one of the largest globally, and the emergence of crypto as a popular asset class is undeniable. With the country already positioned at the forefront of global crypto adoption, there is immense potential for further expansion and development. 

Indians now have access to exchanges that are fully compliant with regulatory standards, both domestically and offshore. This ensures a level playing field for all participants and fosters trust and confidence in the crypto ecosystem. 

One of the key benefits of FIU registration for exchanges is the mitigation of illicit activities. Non-compliant exchanges have often been breeding grounds for illegal activities, including tax evasion and P2P scams. With FIU oversight, law enforcement agencies now have the tools to monitor and regulate crypto platforms effectively, thereby enhancing the industry's reputation and fostering trust among users.

Moreover, compliance efforts such as KYC checks and restricted withdrawals, which were previously viewed with scepticism, are now gaining appreciation from users. They understand that these measures are essential for protecting their interests and ensuring a safe trading environment. 

The FIU's increased visibility into crypto transactions will further bolster transparency and monitoring efforts. By submitting suspicious transaction reports (STRs) and cracking down on illegal activities, authorities can uphold the integrity of the crypto market and safeguard investor interests. It is essential to recognise that compliance is not just a legal requirement but a fundamental aspect of building a robust and sustainable crypto ecosystem.

However, while FIU registration is a positive step towards regulatory clarity, challenges remain. The imposition of Tax Deducted at Source (TDS) has impacted trading volumes across all exchanges in India, leading to a shift towards offshore platforms. P2P trades, while popular, pose risks to customer funds and highlight the need for stricter regulatory oversight.

A collaborative approach involving policymakers, industry stakeholders, and regulators is essential to address the evolving needs of India's crypto industry and foster sustainable growth.

FIU registration of offshore exchanges represents a significant milestone in India's crypto journey. By embracing compliance and regulatory oversight, we can build a safer, more transparent, and resilient crypto ecosystem that fosters trust and innovation. 

(The author is the Co-Founder of CoinDCX)

Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt. Ltd. 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.