1 min read.Updated: 28 Dec 2020, 01:46 PM ISTNeil Borate
The new rules can provide a template for cryptocurrency regulation in India. The regulatory landscape has largely been vacant after the Supreme Court quashed a Reserve Bank of India ban on crypto-related payments in March 2020
MUMBAI: A fresh set of rules proposed by the US Financial Crimes Enforcement Network (Fincen) call for US exchanges to report transfers of cryptocurrency such as bitcoin above $10,000 to non-custodial (unhosted) wallets to Fincen. This also applies to transfers to wallets in certain jurisdictions.
Non-custodial wallets are private wallets such as hardware or paper wallets which are maintained by users directly. These wallets are not hosted by exchanges and exchanges do not have the private keys of such wallets. Exchanges also have to complete Know your Customer (KYC) processes for transfers to non-custodial wallets above $3,000 and keep records of these.
The Fincen rules are open for public comments and the last date for providing feedback is 4 January, 2021.
According to experts, the new rules can provide a template for cryptocurrency regulation in India. The regulatory landscape has largely been vacant after the Supreme Court quashed a Reserve Bank of India ban on crypto-related payments in March 2020.
"The FINCEN rule will not directly affect Indian users, however it can provide a template for Indian regulators," said Kashif Raza, co founder, Crypto Kanoon, a legal information portal for crypto users in India.
Arjun Vijay, co founder of the Chennai based Giottus Cryptocurrency Exchange concurred. "The rule affects US individuals and US exchanges. But if it is adopted by international bodies like the FATF, it will have a bearing on India. I don't think this will shift business outside the US. Exchanges outside the US are already wary of accepting US customers due to the stringent regulation in the US," he said.
However according to Vijay, cryptocurrency volumes in the US could be impacted. “The FINCEN rule will impose an additional layer of paperwork on customers when transferring money to non custodial wallets. They will have to provide KYC for such wallets to exchanges. This can lead to some drop in crypto trading on US exchanges," he said.
Despite the lack of regulation, enforcement agencies in India frequently ask for KYC details of customers from cryptocurrency exchanges. “Today all major Indian exchanges mandate KYC and enforcement agencies know this. They often call for records from such exchanges in specific cases. India is by no means a regulation free zone," added Raza.
There is no legislative framework for cryptocurrency regulation in the country.
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