{"id":38857,"date":"2024-01-02T04:11:02","date_gmt":"2024-01-01T22:41:02","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=38857"},"modified":"2025-04-23T21:41:12","modified_gmt":"2025-04-23T16:11:12","slug":"fui-ind-act","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/fui-ind-act\/","title":{"rendered":"Why did FIU IND Act Against Virtual Asset Providers?"},"content":{"rendered":"<h2>What\u2019s in Today\u2019s Article?<\/h2>\n<ul>\n<li>Background<\/li>\n<li>What is the Premise of the Noncompliance?<\/li>\n<li>Why VDA SPs have been made to Comply with PMLA 2002?<\/li>\n<li>How are other Countries Regulating Virtual Assets?<\/li>\n<li>What Considerations emerge when looking to Regulate VDAs?<\/li>\n<\/ul>\n<h2>Background<\/h2>\n<ul>\n<li>On December 28<sup>th<\/sup>, the Financial Intelligence Unit India (FIU IND) issued show cause notices to nine o\ufb00shore Virtual Digital Asset Service Providers (VDA SPs).<\/li>\n<li>These VDA SPs include Binance, Kucoin, Huobi, Bit\ufb01nex and MEXC Global, among others.<\/li>\n<li>The Director FIU IND wrote to the Secretary, Ministry of Electronics and Information Technology to block the URLs of the above-mentioned entities.<\/li>\n<\/ul>\n<h2>What is the Premise of the Noncompliance?<\/h2>\n<ul>\n<li>In March 2023, VDA SPs in India were brought under anti\u00ad-money laundering\/counter \ufb01nancing of terrorism regulations.<\/li>\n<li>They were mandated to comply with Prevention of Money Laundering Act (PMLA) 2002, verify the identities of onboarded clients, and maintain records of their \ufb01nancial positions and potentially suspicious transactions.<\/li>\n<li>This obligation applies to all VDA SPs operating in India irrespective of physical presence.<\/li>\n<li>Non\u00adregistration made entities non\u00adcompliant despite serving Indian users.<\/li>\n<li>To put it in perspective, the entities \u201cthough catering to a substantial part of Indian users were not getting registered and coming under the Anti Money Laundering (AML) and Counter Financing of Terrorism Network (CFT) framework\u201d.<\/li>\n<li>Currently, 31 VDA SPs have registered with FIU IND.<\/li>\n<li>However, several offshore entities though catering to a substantial part of Indian users were not getting registered and coming under the Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) framework.<\/li>\n<\/ul>\n<h2>Why VDA SPs have been made to Comply with PMLA 2002?<\/h2>\n<ul>\n<li>The objective of the PMLA and its reporting obligation are to enable monitoring and tracking of \ufb01nancial transactions to curb money laundering and terror \ufb01nancing.<\/li>\n<li>Complying with the PMLA 2002 addresses one of the primary concerns of any regulator about the purported anonymity of the crypto assets and their potential use for unlawful purpose.<\/li>\n<li>This is also in line with India\u2019s e\ufb00orts through the G\u00ad20 where it has been advocating for global regulation of cryptocurrency.<\/li>\n<li>The regulation casts reporting, record keeping, and other obligations on the VDA SPs under the PML Act which also includes registration with the FIU IND.<\/li>\n<li>Mandatory KYC veri\ufb01cations would ensure lack of anonymity and businesses not encountering multiple hurdles.<\/li>\n<\/ul>\n<h2>How are other Countries Regulating Virtual Assets?\u00a0<\/h2>\n<ul>\n<li>In Dubai (UAE), they follow licensing framework. The mandatory licenses are comprehensively categorised based on the service that the entity wants to offer in the market.\n<ul>\n<li>For obtaining the mandatory license in the Emirate, it imposes an obligation to comply with AML-CFT laws relevant to \u201cits VA activities, businesses or operations in any jurisdiction at all times\u201d.<\/li>\n<\/ul>\n<\/li>\n<li>In the European Union, the Markets in Crypto-Assets Regulation (MiCA) endeavours to institute uniform EU market rules for crypto-assets.\n<ul>\n<li>The regulation is premised around \u201ctransparency, disclosure, authorisation and supervision of transactions\u201d.<\/li>\n<li>It would provide measures to tackle market manipulation, prevent money laundering, terrorist financing and other criminal activities.<\/li>\n<li>Service providers under this common law would require authorisation to operate in the region.<\/li>\n<li>Though entered into force in June 2023, the legislation is still in consultation stages. The final report is expected in June 2024.<\/li>\n<\/ul>\n<\/li>\n<li>Across the Atlantic, the U.S. does not have a thorough nationwide regulatory framework at present.\n<ul>\n<li>Some digital assets and related activities are covered under certain existing regulations, such as the Bank Secrecy Act and the Anti-Money Laundering Act of 2020.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2>What Considerations emerge when looking to Regulate VDAs?<\/h2>\n<ul>\n<li>The Bureau for International Settlements (BIS), in a report about \ufb01nancial stability from crypto assets in emerging economies (August 2023) observed three high-level policy options under consideration.\n<ul>\n<li>These include an outright ban, containment and regulation.<\/li>\n<\/ul>\n<\/li>\n<li>BIS observed that an outright ban may not prove enforceable.<\/li>\n<li>This is because of the pseudo anonymous nature of crypto markets. There could be a possibility that regulators lose all sight of the market, further shrinking their transparency and making them less predictable.<\/li>\n<li>Containment would imply controlling the \ufb02ows between crypto markets and traditional \ufb01nancial systems.<\/li>\n<li>However, BIS argued that the strategy would not address the vulnerabilities inherent in the crypto markets and could result in \ufb01nancial stability risks.<\/li>\n<li>About regulation, motivation to regulate the asset varies across jurisdictions.<\/li>\n<li>The report holds that it must be ensured that the bene\ufb01ts of regulating and supervising are greater than the costs involved.<\/li>\n<li>Furthermore, for emerging market economies three issues are of importance, that is:\n<ul>\n<li>De\ufb01ning the (regulatory) authority or entity and their scope,<\/li>\n<li>Scope of regulation in terms of either activity or entity,<\/li>\n<li>Filling in the data gaps to understand the technology and interconnections.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<hr \/>\n<h3>Q1) What is the role of FInancial Intelligence Unit?<\/h3>\n<p>The Financial Intelligence Unit &#8211; India (FIU-IND) is the central agency in India responsible for receiving\/collecting, analysing, and disseminating information relating to suspicious financial transactions.<\/p>\n<h3>Q2) What is the meaning of Cryptojacking?<\/h3>\n<p>Cryptojacking is the act of exploiting a computer to mine cryptocurrencies, often through websites, against the user&#8217;s will or while the user is unaware.<\/p>\n<hr \/>\n<p><strong>Source:<\/strong> <a href=\"https:\/\/www.thehindu.com\/business\/Economy\/why-did-fiu-ind-act-against-virtual-asset-providers\/article67695217.ece#:~:text=This%20was%20for%20%E2%80%9Coperating%20illegally,URLs%20of%20the%20mentioned%20entities\" target=\"_blank\" rel=\"nofollow noopener\"><u>Why did FIU IND act against virtual asset providers?\u00a0<\/u><\/a>\u00a0| <a href=\"https:\/\/pib.gov.in\/pressreleasepage.aspx?prid=1991372\" target=\"_blank\" rel=\"nofollow noopener\"><u>PIB\u00a0<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Financial Intelligence Unit is an organisation under the Department of Revenue.<\/p>\n","protected":false},"author":5,"featured_media":38858,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-38857","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/38857","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=38857"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/38857\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/38858"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=38857"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=38857"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=38857"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}