Crypto license in India

The Financial Intelligence Unit India operates under the Ministry of Finance as the primary regulatory authority for virtual digital asset service providers.

Through the March 7, 2023 notification, the prevention of money laundering act brought all VDASPs under comprehensive anti money laundering oversight.

And as this framework is a requirement to offer crypto assets related services in India, it is not limited to Indian companies, making it available to foreign entities.

Section 2(1)(wa) of the Money Laundering Act 2002 specifically defines virtual asset service providers as reporting entities, establishing mandatory compliance obligations for any entity offering virtual digital asset services to Indian market participants.

Registered VASPs are tasked with conducting customer due diligence and maintaining transaction records for five years as part of compliance.

Entities must file Suspicious Transaction Reports (STRs) and submit high-value transaction data to the FIU-IND.

As part of the registration procedure, applicants must create an account on FIU IND’s FINnet Gateway platform through the official FIU IND website.

This regulatory framework aligns India with international standards set by the financial action task force.

The legal framework behind the Virtual Digital Assets Services Providers registration status in India is the Prevention of Money Laundering Act of 2002.

The latest amendments include virtual digital assets services providers into the scope of this regulation, that aims to enforce the FATF recommendations in India and prevent financial crime.

The Act is completed by the AML & CFT Guidelines For Reporting Entities Providing Services Related To Virtual Digital Assets, issued in 2023 by the FIU IND.

These guidelines, as the name indicates, providing guidance and information for registered VASPs in India, in regards to properly comply with AML-CFT and KYC requirements and with Indian regulation.

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• FIU-IND Official Website
• Prevention of Money Laundering Act Documentation
• VASP Registration Guidelines

The registration framework covers diverse virtual asset service providers including:

• Crypto exchanges facilitating virtual digital asset trading
• Wallet providers offering custody solutions for virtual assets
• NFT platforms enabling governance tokens and digital collectible transactions
• VDA service providers offering institutional services for virtual digital assets

This comprehensive coverage ensures that all entities handling virtual digital assets operate within India’s regulatory compliance framework, providing market participants with enhanced financial transparency and protection against illicit financial activities.

Compliance with the Indian FIU rules reduces exposure to regulatory risks associated with money laundering and terrorist financing.

Unregistered entities are at a higher risk of being exploited by criminals, leading to potential involvement in money laundering and terror financing scandals.

Obtaining a crypto license in India provides foreign virtual asset service providers with significant operational and competitive advantages in the rapidly evolving industry.

• Recognized by banks and financial institutions mean a significantly higher likeliness of being green lighted in the process of negotiating the opening of a corporate account for your operations. VDA Service Providers, by demonstrating their soundness to the Indian regulator, shows that its operations are legal and do not incur the level of risk of non-regulated crypto companies.
• Accessible requirements for registration and compliance. The regulatory framework is focused on preventing financial crimes and therefore rely on the Financial Action Task Force’s recommendations (FATF). This means fairly standard compliance requirements, that are easily fulfilled with the assistance of a seasoned legal partner such as LegalBison.
• Trustworthiness among your customers, as the majority of crypto assets users prefer dealing with registered virtual asset service providers. The registration certificate demonstrates commitment to regulatory compliance and financial transparency, significantly enhancing market credibility. Transparency and trust are facilitated by FIU registration as it signals compliance with regulatory standards to clients and stakeholders.
• Stable jurisdiction and framework. Registered virtual digital asset service providers in India benefit from regulatory clarity, reducing business risks associated with changing compliance requirements. This stability enables long-term strategic planning and sustainable growth.
• Cheap and cost-effective, as there are no application fees, no renewal fees, and minimal costs relative to AML-KYC compliance. The process also doesn’t require the deposit and maintenance of a defined authorized share capital. The Indian framework is one of the most competitive out there in terms of costs.

Understanding the financial investment required for VDASP registration in India helps businesses plan their regulatory compliance strategy effectively.

• No government registration fees;
• No annual renewal fees;
• No minimum required share capital;
• Taxes are paid in the company of registration, India doesn’t levy taxes on foreign-based VDASPs.

This makes India one of the cheapest crypto licensing option available on the global market. Most of the budgeting to plan for encompasses the due preparation of the compliance documents and the application, as offered by LegalBison.

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Successful FIU-IND registration establishes ongoing responsibilities that crypto licensed companies must maintain for continued regulatory compliance.

• Ongoing reporting of suspicious transactions: Registered reporting entities must submit regular suspicious transaction reports to the FIU, identifying potentially illicit financial activities and supporting law enforcement agencies in combat financial crimes efforts.
• Maintaining a record of transactions: VASPs must maintain comprehensive transaction records, customer data, and compliance documentation. These records support regulatory oversight and enable effective cooperation with regulatory authorities during investigations.
• Annual compliance audits: Regular system audits ensure continued adherence to AML standards and FIU-IND regulations. These audits verify transaction monitoring effectiveness and overall compliance infrastructure performance.
• Responsibilities of the Principal Officer: The designated principal officer maintains ongoing responsibilities for regulatory compliance, staff training, and system updates. This role ensures continuous adherence to prevention of money laundering act requirements.
• Maintenance of proper monitoring systems: Unlike traditional licenses requiring renewal, the registration model demands continuous compliance monitoring rather than periodic renewal processes. This approach provides regulatory flexibility while maintaining oversight effectiveness. India follows the Financial Action Task Force (FATF) Travel Rule, requiring providers to share sender and receiver information for transactions exceeding 50,000 INR (about 564 USD).

All-in-all, the compliance requirements of an Indian crypto license are standard. The proper preparation of compliance documents and assistance in keeping track of the necessary actions to be conducted is key to operate without hassle. LegalBison offers the complete preparation of required documents and everything necessary to apply for a VASP license in India and to operate according to the regulations.

No, cryptocurrencies are not “unregulated” nor “banned” in India. The Prevention of Money Laundering Act of 2002 specifically provides regulation of the crypto ecosystem in India.

No, offshore crypto companies aren’t exempt from registration in India, if they are willing to target the Indian market. The VDASP registration is both a globally recognized crypto framework and a mandatory step to providing crypto assets services to Indian customers.

No, registration isn’t limited to crypto exchanges. All virtual asset service providers including wallet providers, NFT platforms, and governance tokens services must register

No, the VDASP guidelines aren’t published by the Reserve Bank of India. The FIU India is the one reference body behind the crypto framework in India.