India -- Licensing Requirements Regulatory Overview

India does not have a specific licensing regime for cryptocurrency or virtual digital asset (VDA) service providers, including exchanges, custody providers, and payment processors; instead, it operates a mandatory registration framework as reporting entities under the Prevention of Money Laundering Act, 2002 (PMLA) with the Financial Intelligence Unit - India (FIU-IND). [3][4][6] This applies uniformly to all VDAs service providers (VASPs) serving Indian users, such as exchanges (e.g., trading platforms), custody providers (e.g., wallet services), and payment processors handling VDA transactions, requiring FIU-IND registration since March 2023 to comply with anti-money laundering (AML) rules. [2][3][5][6] Non-compliance can lead to enforcement actions like URL blocking for offshore entities. [5]

Registration vs. Licensing Regime

India uses a registration regime rather than licenses: VASPs must register with FIU-IND as reporting entities under PMLA, enabling operations without a traditional "license" but mandating ongoing AML/CFT compliance. [3][4][6] No dedicated crypto licenses exist from regulators like RBI or SEBI, though standard business registrations (e.g., PAN, TAN, GSTIN under Companies Act, 2013) are required, and future laws like the 2021 Cryptocurrency Bill (not yet passed) could introduce licensing. [1][7] Foreign entities can register without forming an Indian company if compliant. [3]

Key Requirements

• Capital: No specified minimum capital or net worth mandated for FIU-IND registration; general business setup costs apply (e.g., ~$135,000 minimum for exchanges). [1][3][8] Future licensing might require net worth like equity exchanges. [1]
• AML/KYC: Mandatory comprehensive AML/KYC policies per PMLA and FATF standards, including customer due diligence, transaction monitoring, suspicious transaction reporting to FIU-IND, and record-keeping for all transactions. [3][4][6] KYC checks required since March 2023 gazette notice. [6]
• Local Presence: Not strictly required; offshore VASPs serving India must register and appoint a designated director/principal officer for compliance (can be offshore if compliant). Indian company preferred for domestic operations. [3][4]
• Other: Robust cybersecurity (mandatory CERT-In empanelled audits), technology for monitoring/reporting, principal officer appointment, and tax compliance (e.g., TDS at 1% on transfers). [2][3][6]

Application Process

1. Submit documents (charter, tax filings for ~3 years) for physical/virtual meeting with FIU-IND. [4]
2. Receive in-principle approval if compliant. [4]
3. Complete online registration via FIINET Portal 2.0. [4]
4. Obtain final registration and maintain ongoing reporting/record-keeping. [3][4] Assistance from legal firms recommended for document preparation. [3]

Key Regulatory References (official sources not directly in results; based on cited frameworks):

• Prevention of Money Laundering Act, 2002 (PMLA): https://www.indiacode.nic.in/handle/123456789/1523 [3][4][6]
• Prevention of Money-laundering (Maintenance of Records) Rules, 2005: https://fiuint.gov.in/files/AML_rules_2005.pdf [6]
• FIU-IND Registration Guidelines: https://fiuindia.gov.in/ [3][4]
• March 7, 2023 Gazette Notice on VDA KYC: Available via Ministry of Finance notifications. [6]

Note: Regulations emphasize AML over activity-specific rules; consult FIU-IND for latest as enforcement evolves (e.g., audits now tied to registration). [2][5]