Cybersecurity evaluations become compulsory for cryptocurrency companies in India.
In a significant move to combat the rising crypto crimes in India, which account for nearly 20-25% of all cybercrime cases, the Indian government has mandated cybersecurity audits for cryptocurrency exchanges, custodians, and intermediaries.
These audits, to be conducted by a security auditor under the Indian Computer Emergency Response Team (CERT-In), will ensure that these platforms meet compliance standards similar to banks. This move follows the Prevention of Money Laundering Act (PMLA) coverage already extended to Virtual Asset Service Providers (VDA) firms.
The Financial Intelligence Unit (FIU), India's anti-money laundering agency, has also introduced a new accreditation called "Partner Accreditation for Compliance & Trust" (PACT), replacing the "Fit & Proper" certificate. The FIU retains the power to deny or cancel registrations if firms fail to meet anti-money laundering requirements.
The increased focus on cybersecurity is a response to recent cryptocurrency thefts, according to Harshal Bhuta, partner at CA firm P. R. Bhuta & Co. The audits will rigorously test for weaknesses through penetration testing, code audits, and real-time monitoring, uncovering flaws before attackers exploit them.
The audits are also expected to include checks on the storage of 'private keys,' critical components of the cryptocurrency system.
The Indian Parliament's Standing Committee on Home Affairs recently released a report titled "Cyber Crime - Ramifications, Protection and Prevention," highlighting the increased exploitation of cryptocurrencies in financial frauds, money laundering, ransomware attacks, and human trafficking.
Mudrex, one of India's largest crypto investment platforms, conducted a survey on crypto regulation, taxation, and investment trends. The survey found that 93% of respondents support regulation, with 56% wanting full investor-protection frameworks, 24% preferring lighter oversight to encourage innovation, and 13% favoring regulation limited to taxation.
Some industry reports suggest the Indian government could adopt a segmented approach to crypto regulation, treating Bitcoin, stablecoins, and utility tokens differently based on their use. However, the Mudrex survey did not mention any specific recommendations for this segmented approach.
The survey also found that some respondents believe the government should lower taxes on cryptocurrencies. Currently, India has around 55 entities involved in crypto trading, custody, and related services.
Purushottam Anand, Advocate and Founder of Crypto Legal, also mentioned the FIU's focus on compliance in his recent statements. The audits are a crucial step towards ensuring the safety and legitimacy of the growing cryptocurrency industry in India.
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