India's Global Initiative: Launching Crypto Exchange Database Against Crime

With a focus on combating illegal activities linked with cryptocurrencies, India is set to launch a groundbreaking database of global crypto exchanges, providing invaluable insights and support to law enforcement agencies.

India's Global Initiative: Launching Crypto Exchange Database Against Crime

Thursday October 05, 2023,

2 min Read

India is set to unveil a global database of cryptocurrency exchanges in a strategic move aimed at countering criminal activities, notably money laundering, associated with cryptocurrencies. This initiative will provide critical information about both legitimate exchanges and those clandestinely operating on the dark web.

Database Objectives

The initiative seeks to facilitate law enforcement agencies, including the Enforcement Directorate (ED), the Income Tax Department, and the Central Bureau of Investigation (CBI), in tracking and monitoring cryptocurrency usage tied to illicit activities. This comprehensive database will be an instrumental tool in providing insights and data necessary for investigative and preventive measures against crypto-enabled crimes.

The Crypto-Asset Reporting Framework (CARF)

The introduction of this database follows the Crypto-Asset Reporting Framework (CARF) launched by the Organisation for Economic Co-operation and Development (OECD). CARF is an innovative infrastructure that supports the automatic exchange of tax-related information on cryptocurrency transactions, enhancing transparency and compliance in the dynamic crypto landscape.

Collaboration Challenges

While the Indian authorities are pushing for international collaboration to obtain data on dark web exchanges, gathering information from countries known as tax havens is a considerable challenge. These jurisdictions often have strict secrecy laws, limiting the sharing of financial information with foreign entities.

A Response to Crypto-Related Crimes

With the marked increase in cryptocurrency use for illegal activities, such as drug trafficking and organised crimes, India's Ministry of Home Affairs (MHA) expresses significant interest and support for the project. Between 2019 and 2021, the Financial Intelligence Unit (FIU) discovered illegal drug transactions totaling around Rs 28,000 crore (approximately 3.36 billion USD), all conducted via cryptocurrencies.

Ongoing Initiatives

In alignment with the global database initiative, the Home Ministry is concurrently developing a Cryptocurrency Intelligence and Analysis Tool (CIAT). This specialised tool will augment the ministry's capabilities in the cryptocurrency domain, enhancing the analysis and intelligence gathering regarding crypto transactions and associated criminal activities.

India's impending launch of a global database of cryptocurrency exchanges marks a significant stride towards establishing transparency and security in the crypto space. While users currently grapple with a 30% tax on cryptocurrency profits and a 1% TDS on transactions, the initiative symbolises the government's commitment to ensuring that digital assets aren't exploited for unlawful activities. With international cooperation and robust technological tools, the database will undoubtedly serve as a bulwark against the misuse of cryptocurrencies for illegal transactions and money laundering activities.