RIGHT SIDE OF LAW To address concerns raised by regulators on money laundering, round tripping
Sachin.Dave@timesgroup.com
Mumbai:
Cryptocurrency exchanges are putting in place mechanisms and processes to address concerns raised by regulators over possible use of cryptos for money laundering and round tripping in the face of new regulations being brought in by the government.
Top exchanges are going the extra mile to check the credentials of investors using their platforms. Some are also looking to stop investors from swapping crypto assets, industry insiders said.
Some of the largest players are also learnt to be putting in place processes where investors will not be able to buy or sell anything using cryptocurrencies. That is, cryptocurrencies can only be used as an asset and not as a currency.
The Reserve Bank of India (RBI) had raised concerns around crypto assets and how it could pose a risk to India’s financial stability.
In a meetings with the government, regulators including the RBI had raised concerns around how cryptocurrencies could be used for money laundering.
CoinSwitch Kuber follows a closed loop system in which investors can sell crypto assets and withdraw Indian rupees but they cannot deposit, withdraw or transfer to others any crypto asset. So, customers can use crypto only as an investment asset and cannot transfer crypto assets out of the platform. “Even though crypto investing is currently unregulated, we have in place robust systems to check misuse,” said Ashish Singhal, founder and CEO of CoinSwitch Kuber. “We use a robust KYC (know your client) process during our user onboarding similar to equities...” he said.
Exchanges said their rigorous procedures in place involve face recognition, ID and address proof verification along with bank verification through penny drop API.
More and more exchanges are tightening the system to have maximum oversight and transparency.
Top exchanges are also working on a way to address other issues such as the income tax applicability on investors and, going forward, exchanges will start sharing their data with tax authorities, industry insiders said.
