Tag: kyc/aml

Experts, BFSI News, ET BFSI

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Ahead of the government’s bill on cryptocurrency, there is no clarity on whether the government plans to ban cryptocurrencies or regulate them.

The bill intends to ban all private cryptocurrencies, with certain exceptions, to promote the use of the underlying technology of cryptocurrency. The much-awaited bill also aims to provide a framework for the creation of an official digital currency to be issued by the Reserve Bank of India. The government has already made it clear it has no plan to make cryptocurrency a legal tender.

What if govt bans cryptos

In the event government plans to ban cryptocurrencies, experts said any crypto ban could cause investors to move underground and obtain cryptos and trade in them illegally. Moreover, the P2P transactions do not fall under any legal ambit and hence, decentralised exchanges would continue to thrive regardless of the ban. Banning cryptos would not only prove a technological challenge for the government but also mean huge capital funds moving out of the country.

The Blockchain and Crypto Assets Council, the association of crypto exchanges in the country, released a statement reiterating the futility of the ban. A blanket ban on cryptocurrencies will encourage non-state players, thereby leading to more unlawful usage of such currencies, it said.

“The Council has always argued in favour of prohibiting the usage of private cryptocurrencies as a currency in India by law since usage as currency is likely to interfere with monetary policy and fiscal controls. On the other hand, the council has advocated their use only as an asset. The council believes that a smartly regulated crypto assets business will protect investors, help monitor Indian buyers and sellers, lead to better taxation of the industry, and limit illegal usage of cryptos,” BACC said in a statement.

Grey areas

Also, the government needs to define the scope and meaning of the term ‘private cryptocurrencies.’ Almost all the cryptocurrencies would be private except significant cryptocurrencies like Bitcoin and Ethereum that the miners collectively own, if the definition concerns ownership rights or anonymity of transactions.

However, except like Bitcoin, not all cryptocurrencies are store of value with there being utility tokens like Ethereum, Cardano.

Experts said the exchanges could be asked to follow stringent KYC/AML procedures to dissuade money laundering and terror financing activities.



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Bitcoin in bank account? How banks can partner crypto firms, BFSI News, ET BFSI

Personal Finance

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Can’t beat them, join them.

After stonewalling cryptocurrencies and firms, banks are now coming around to the cryptocurrencies.

Indian bankers, which are not ready to touch crypto even with a barge pole following the regulator’s reluctance over cryptos, can parse the American Bankers’ Association’s (ABA) report on how lenders can partner from the new-age currency.

The ABA report

The American Bankers’ Association (ABA) has issued a new report that suggests banks consider partnerships with crypto firms based on the increased profitability of the sector and client interest. The ABA further suggests crypto use cases for banks with revenue models and regulatory issues for each use case.

“Cryptocurrency markets are rapidly evolving, and there is currently a diverse and complex ecosystem of companies offering access to digital asset products. The digital and programmable nature of these products means they can be used to facilitate many kinds of financial activities that increasingly mirror the products and services offered by traditional financial institutions, ” it said.

The use case for banks

n payments the blockchain-powered payment networks have the potential to allow for faster and more efficient payments, especially in cross-border transactions.

In lending blockchain technology can allow for cheaper, more secure, and more efficient lending processes while in settlements, distributed ledgers can provide cheaper and faster transactions between financial institutions.

Custody/Wallets provides independent/secure storage for users to hold and invest in crypto assets, while KYC/AML helps banks track the flow of funds and identify the parties involved in digital asset transactions

Digital identity distributed ledgers can provide the necessary record of information needed for authentication and verification purposes while given the proposed reporting structure for crypto transactions, the distributed ledger transactions can be easily found and reported in an efficient and timely manner.

Banks can offer business banking services to crypto companies such as corporate accounts, USD/fiat custodial accounts.

The customer can lend his or her crypto for interest and a bank could earn a fee or percentage of the crypto earned.

Banks could also charge fees for these services similar to a debit or credit card transaction and can provide crypto lending to borrowers for a fee.

Banks can look into revenue models that include charging transaction fees, listing charges for adding crypto to a platform, and deposit fees.

They can look at revenue from collecting the spread on transactions for crypto assets that are classified as securities.

The asset management use case for banks would enable a fee for service on a crypto portfolio.

In India, this will need the regulatory haze to fade first.



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