CRYPTOCURRENCY AND VDA SPS (Syllabus: GS Paper 3 – Economy)

Context: The Financial Intelligence Unit India (FIU-IND) has issued show cause notices to nine offshore cryptocurrency and virtual digital assets service providers (VDA SPs).

oThe nine VDA SPs include Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global and Bitfinex.

Cryptocurrency

• About: Cryptocurrency refers to a digital or virtual currency that employs cryptography for security measures.
• Decentralization: One of the defining features of cryptocurrencies is their decentralized nature, which means they are not under the control of any government or institution.
• Examples: Prominent examples of cryptocurrencies include Bitcoin, Ethereum, and Litecoin.

Virtual Digital Asset Service Providers (VDA SPs)

• Mandatory Registration in India: VDA SPs operating in India, both offshore and onshore, engaging in activities such as exchanging virtual digital assets and fiat currencies, transferring virtual digital assets, and safekeeping/administration of virtual digital assets, must register with FIU IND as a Reporting Entity.
• PMLA 2022 Obligations: Registered VDA SPs are obligated to comply with a set of obligations outlined in the Prevention of Money Laundering Act (PMLA) 2022, ensuring adherence to regulatory standards and preventing money laundering activities.

Financial Intelligence Unit India (FIU-IND)

• About: FIU-IND is the national agency responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions to enforcement agencies and foreign FIUs. 
• Nodal Ministry: Finance Ministry.