Exchanges must be mandated to report suspicious transactions, officials tell Home Secretary
Exchanges must be mandated to report suspicious transactions, officials tell Home Secretary
Government investigative and intelligence agencies are pressuring the Center to separately list cryptocurrency exchanges under the existing regulatory mechanism, thus requiring exchanges to proactively share information regarding suspicious transactions with the police or law enforcement authorities.
On August 17, the issue was discussed at the National Security Strategies Conference attended by Interior Minister Amit Shah.
A senior government official said it emerged during an investigation in recent months that Chinese front companies that operate digital lending apps in India have been sending funds out of India through crypto exchanges. . “Ownership of cryptocurrency exchanges, operated in India, by Chinese companies is not yet registered,” the official said.
Currently, authorities can only seek information from these exchanges after a criminal case has been registered.
The official added that although law enforcement and police are authorized to seek information under Article 91 of the Code of Criminal Procedure (CrPC), on numerous occasions in the absence of a first information report (FIR), crucial information cannot be searched. of these exchanges.
At the conference, the Intelligence Bureau gave a presentation on the challenges posed by crypto exchanges. An official said that most exchanges do not have a physical office and data storage is cloud-based.
The agencies are seeking powers similar to those available under the Prevention of Money Laundering Act (PMLA) to obtain stock exchange information.
“There is no specific law to require crypto exchanges to report suspicious transactions. Reporting entities such as a bank, wallets, etc. must be clearly mentioned in the law for them to report such activities,” the official said.
Recently, the Law Enforcement Branch while investigating a case froze assets worth ₹370 crore of Flipvolt and allied companies in a money and asset laundering case worth ₹65 crore another such exchange, WazirX.
On July 18, Finance Minister Nirmala Sitharaman informed the Lok Sabha that the Reserve Bank of India (RBI) had recommended a ban on cryptocurrencies citing “destabilizing effects” for the monetary and fiscal health of the country, but a law to regulate or ban cryptocurrencies can only be effective once there is some form of international agreement in place.
On March 4, 2020, the Supreme Court overturned a 2018 RBI circular, which sought to prevent banks and institutions from trading in “virtual currencies”.
At the conference, the Home Secretary was told there was an urgent need to regulate and give investigative agencies the power to obtain information about cryptocurrency exchanges and urge them to “share proactively information about suspicious flows with the police or intelligence agencies”. the official said.
The official added that the use of crypto has increased exponentially during the lockdown period of 2020 and 2021 due to mobile apps and its basis is speculation rather than real commerce.
“Currently, agencies use human intelligence to identify suspicious transactions used for money laundering or terrorist financing. What happens if a user does not share their password? be collected only from the exchange, within a legal framework, they will be required to share the information,” the official said.
In her February 1 budget speech, Ms. Sitharaman introduced a 30% tax on income derived from the transfer of virtual digital assets, including cryptocurrencies.
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