The FIU-IND has issued updated AML/CFT guidelines establishing a regulatory perimeter for Virtual Digital Asset Service Providers (VDA SPs) operating in India. Under the Prevention of Money Laundering Act, all VDA SPs—including those handling non-fungible tokens and assets defined under Section 2(47A) of the Income-tax Act—must register as Reporting Entities (REs). The framework excludes the RBI-issued Digital Rupee but covers all other VDA activities to promote a risk-based approach to financial integrity.
The guidelines institutionalize transparency through several mandatory pillars, including Registration & Governance via the FINGate portal with document submission and the appointment of a Designated Director and Principal Officer. Robust Client Due Diligence requires PAN and identity checks for individuals, beneficial ownership verification for entities, and Enhanced Due Diligence for high-risk clients.
The Travel Rule & Monitoring requires SPs to immediately and securely transmit originator and beneficiary information for all transfers, with ongoing AI/ML monitoring to flag indicators and generate Suspicious Transaction Reports. Anonymity Enhancing Crypto Tokens, mixers, or tumblers are strictly prohibited, and EDD must be applied to transactions involving unhosted wallets.
The FIU-IND is the central national agency responsible for receiving, analyzing, and disseminating information relating to suspect financial transactions to law enforcement agencies; it acts as the primary supervisor for VDA SPs, requiring them to demonstrate their AML/CFT systems during mandatory in-person meetings before registration is finalized. A VDA SP is any entity that facilitates the exchange, transfer, or safekeeping of virtual digital assets as defined under Indian law, including crypto exchanges and NFT platforms, all of which are now required to maintain client and transaction records for at least five years to enable the reconstruction of transactions for law enforcement.
The Travel Rule in Virtual Digital Assets is explained as a global standard requiring financial institutions and VDA SPs to share specific information about the senders and recipients of digital asset transfers. In the Indian context, when you move crypto from one exchange to another, the sending exchange must travel your name, account number, and address to the receiving exchange, eliminating the anonymity gap that criminals often exploit to move funds between platforms.
These reforms align India with FATF standards and bolster national security, investor protection, and compliance culture through supervised VDA activity and interoperability with global regulated markets. They ban Anonymity Enhancing Crypto Tokens and mixers, and require automated transaction monitoring and cross-border interoperability.
The FIU-IND has expanded the AML/CFT perimeter for Virtual Digital Asset Service Providers, making registration as Reporting Entities mandatory under the Prevention of Money Laundering Act. The rules cover most VDA activities, including NFTs and assets defined under the Income-tax Act, while excluding the central bank’s Digital Rupee.
The guidelines establish key compliance pillars, including Registration & Governance via the FINGate portal with required documents, and the appointment of a Designated Director and Principal Officer. They mandate robust Client Due Diligence, with PAN and identity checks for individuals, beneficial ownership verification for entities, and Enhanced Due Diligence for high-risk clients. The Travel Rule & Monitoring require immediate transmission of originator and beneficiary information, with ongoing AI/ML monitoring to flag indicators and generate Suspicious Transaction Reports, while anonymity-enhancing tokens and mixers are prohibited.
FIU-IND clarifies its supervisory role and the definition of a VDA SP as any entity facilitating exchange, transfer, or safekeeping of virtual assets, now obligated to retain client and transaction records for at least five years. The Travel Rule applies to inter-exchange transfers to close anonymity gaps used by criminals. These reforms reflect FATF standards, bolster national security, protect investors, and reinforce a culture of compliance alongside interoperability with global regulated markets.
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