India Includes Crypto Businesses in New Rules for Cyber Security

The move is seen as a positive step that gives clarity to the crypto industry on several fronts.

AccessTimeIconMay 2, 2022 at 9:31 a.m. UTC
Updated May 11, 2023 at 5:09 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

India named the country's Computer Emergency Response Team (CERT) as the national agency for cyber security, including the crypto industry, in a move that clarifies which agency has the authority over suspicious or illicit activities in the sector.

The move requires crypto businesses, such as virtual asset service providers, to keep know-your-customer (KYC) information and records of financial transactions for five years “to ensure cyber security in the area of payments and financial markets for citizens while protecting their data, fundamental rights and economic freedom in view of the growth of virtual assets.”

While the industry views the announcement as a soft step toward regulation before crypto-specific legislation is enacted, the government has not suggested the move is a step toward regulation. A similar, but much stronger, move was the rule to tax crypto businesses before crypto-specific legislation, announced in February. At the time, a senior finance ministry official said “just because it is taxed does not make it legal.”

India’s crypto legislation remains in cold storage with the government seeking global consensus and Indian Finance Minister Nirmala Sitharaman noting the potential of crypto and blockchain as well as the safety concerns around it.

“Blockchain itself is so full of potential not just in the payment arena, but also in very many others," she said last week. "Our intention is in no way to hurt this (cryptocurrency or blockchain)." However, she added that "it also can be manipulated for not so desirable ends, whether it is on money laundering or whether it is on leading towards financing terror.”

This is the first time the government has made it clear that the data needs to be maintained for a period of five years. KYC processes and data will need to be aligned to the guidelines of three entities: the Reserve Bank Of India (RBI), Securities and Exchange Board of India (SEBI) and Department of Telecom (DoT).

Crypto businesses also need to appoint a point of contact for CERT, a unit of the Ministry of Electronics and Information Technology, to have an open channel of communication regarding these new rules.

Speaking at a public forum on Friday, Sitharaman sought “collective global action” for effective regulation of this dynamic technology.

“If there is impatience outside in the world saying what are you doing about crypto? I can understand the impatience but I'm sorry, that's how it is going to be," she said at a recent fireside chat at Stanford University. "It will have to take its time for all of us to be sure that at least with the given available information, we are taking a discerned decision. It can't be rushed.”

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Amitoj Singh

Amitoj Singh is a CoinDesk reporter.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.