India Looks to Get Idea for Its Crypto Rules from Fincen

Indian authorities may look at new rules proposed by the US financial Crimes Enforcement Network (Fincen). The new rules are associated with US exchanges reporting transfers of digital currencies when their value crossed $10,000. The transactions in Bitcoin made to non-custodial wallets will fall under the new rules.

What are non-custodial wallets?

Non-custodial wallets are private wallets which can be in the form of paper wallets or hardware wallets. They are not hosted by any exchange and no entity, except the owner of the wallet, holds their private keys. Exchanges usually prefer completing Know Your Customer (KYC) processes for transfers to non-custodial wallets if the transaction value crosses $3,000. The new rules from Fincen will be available for public comment till February 4, 2021.

What is India planning?

Experts suggest that India could use the Fincen rules as a model for its cryptocurrency regulation. In early 2018, the country’s apex bank- the Reserve Bank of India (RBI) imposed a blanket ban on banking services to crypto entities. In early 2020, the Supreme Court quashed that ban. However, the regulatory landscape for cryptocurrencies is still largely vacant.

Kashif Raza, the co-founder of Crypto Kanoon, commented on the rules and said that while Fincen policies will not affect Indian users directly, they can give a template to Indian regulators to follow. Arjun Vijay, the co-founder of Giottus Crypto Exchange said,

“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.”

Vijay said that the rules could affect the volume of crypto trades in the US as Fincen adds an extra step of paperwork for the users while making money transfers.