Virtual Digital Assets Service providers (VDA SP’s)
Context:
The Ministry of Finance has issued a notification that brings transactions involving VDAs under the purview of the Prevention of Money Laundering Act (PMLA), 2002.
Virtual Digital Assets (VDAs) under the Anti-Money Laundering and Counter-Financing of Terrorism (AML-CFT) framework is a major regulatory step for India.
This move is significant because it aligns the country with global standards set by the Financial Action Task Force (FATF) to mitigate the risks associated with cryptocurrencies and other digital assets.
About Virtual Digital Assets Service Provider’s (VDA SP):
A Virtual Digital Asset Service Provider (VDASP) refers to any individual or entity that deals in, facilitates, or provides services related to Virtual Digital Assets (VDAs) — such as cryptocurrencies, NFTs (Non-Fungible Tokens), and similar blockchain-based digital assets.
VDA SPs are treated as "Reporting Entities”, comparable to banks/securities intermediaries.
It includes:
Exchange services: Buying or selling VDAs for fiat currency or for another VDA.
Transfer services: Moving a VDA from one address or account to another.
VDA service providers must:
Register with FIU–IND, under Ministry of Finance.
Maintain KYC data.
Maintain records for at least five years.
Cryptocurrencies, NFTs, tokenised assets; not legal tender but recognised as assets for tax & Anti-money Laundering (AML) purposes.
The Financial Intelligence Unit–India (FIU–IND) monitors and enforces compliance
Legal Backing for VDA’s:
VDAs are defined under Section 2(47A) of the Income Tax Act, 1961.
The FIU-IND AML & CFT Guidelines for VDA SPs implement obligations under PMLA 2002, PML Rules, and related laws (UAPA, WMDA).