Crypto Players in India Kick Start Work on a New Code of Conduct

For crypto players in India, the months between now and the possible enactment of a law is like a no man’s land. And, having sensed that the crypto bill would not go through in the ongoing session of Parliament. Crypto exchanges and platforms are working on a new code of conduct to navigate existing laws and business landscape while dealing with various government departments like the Income Tax and Enforcement Directorate during the continuing regulatory void.

The older code is being improved to consider closer monitoring of flows, stand arising know-your-customer procedures, keeping tabs on high volume, high frequently transactions, and even introducing tax deduction at source. The new code, outlining the proposed measures body Block chain and Crypto Assets Council for comments from exchanges and intermediaries which are members of the Council.

The document could be finalized after the council members meet later this month, said an exchange official.

“Among the proposals to be discussed under the new code is whether exchanges should carry out customer profiling to identify bad actors. For this we need information such as the salary of an investor- the way banks and FinTech firms do. Should an investor who deposits from a private wallet to an exchange wallet, or transfers coins from the exchange wallet to an outside wallet be asked to give a declaration?

What are the legal contours for a TDS at the exchanges level?” said an exchange official on condition of anonymity.

One of the opaque areas in the crypto world is the movement of coins to and from private wallets, and from one private wallet to another through peer-to-peer transactions.

With the parliament session underway, most council members declined to share their views on the subject. “We need to be more cautions, and prepare ourselves for the regulations as and when they come. We need a self-governing framework, so that when the rules, come it won’t be tough for us to adopt,” said another person.

A closer scrutiny of flows would mean tracking unusual transactions, one-to-many and many to-one-money transfers, and if possible reporting the data to a central body, Unlike banks which have to immediately report high-valued transfer and abnormal flows in bank accounts to the Financial Intelligence Unit (FIU) as an anti-money laundering system, crypto exchanges have no such reporting mechanism.

Some of the crypto exchanges have come under the glare of ED for violation of foreign exchanges regulations by traders who bad used the platforms to by-pass banks and transfer or received money from overseas patties under the garb of cryptocurrencies to share ledger entries to find out the price, time, and number of coins sold by traders. S-ET

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