The Financial Intelligence Unit–India (FIU-IND) issued updated guidelines to regulate service provider (SP) dealing in VDAs.
- It effectively brought VDA SPs within the anti-money laundering, Countering the Financing of Terrorism, Counter-Proliferation Financing (AML/CFT/CPF) regulatory framework, requiring them to comply with due diligence and reporting obligations similar to other reporting entities.
- In 2023, VDA SPs were brought under the ambit of Prevention of Money Laundering Act (PMLA), 2002.
Key highlight of the Guidelines
- Appointment of Principal Officer (PO): Every VDA Reporting Entity must appoint a Principal Officer.
- Cybersecurity & Data Protection: VDA SP now requires a Cyber Security Audit Certificate issued by Indian Computer Emergency Response Team (CERT-In) empaneled auditor.
- Unhosted Wallet Transactions: Reporting entities must collect data on transfers involving unhosted (self-custody) wallets.
What is Virtual Digital Asset (VDA)?
- It is defined under the Income-tax Act, 1961.
- Any digitally generated information, code, number, or token (excluding Indian or foreign currency) created using cryptographic or similar means, which:
- Represents digital value,
- Is electronically transferable, storable, or tradable.
- Non-Fungible Tokens (NFTs) or similar digital tokens.
- NFT is a unique token that can represent digital collectibles or real-world assets.
- Any digitally generated information, code, number, or token (excluding Indian or foreign currency) created using cryptographic or similar means, which:
- Income from transfer of VDAs is taxable at the rate of 30% (plus surcharge and cess).
