India, Qatar's Financial Intelligence Units Partner to Combat Money Laundering through Virtual Digital Assets

Misuse of virtual digital assets (VDAs) for money laundering has been a top concern for regulators globally since cryptocurrencies began attracting widespread investor interest. India and the UAE, two regions seeing significant growth in the VDA sector, have now joined forces to address this issue. This week, the Financial Intelligence Units (FIUs) of both nations met in New Delhi to finalise an agreement aimed at combating the illicit use of crypto assets by criminal entities for money laundering activities.

During the meeting, the FIUs of India and the UAE acknowledged the growing threat posed by money laundering, with evidence pointing to an increase in such activities. Another critical issue addressed was the use of virtual digital assets (VDAs) in terrorist financing. Due to the largely untraceable and still relatively unregulated nature of crypto transactions, illicit actors are increasingly exploiting these assets to move illegal funds.

“The meeting was enriching for both the sides as they discussed and touched upon various areas such as the IT systems used by respective jurisdictions, public-private partnership initiative of FIU-IND (FPAC), private- private partnership for reporting entities in India for AML/CFT strategic analysis and (the exchange of) tools used by the two FIUs,” the release detailing the meeting said.

Under the agreement, India’s FIU will share its expertise and insights on managing virtual digital asset service providers (VDA-SPs).

Since December 2023, FIU-IND has assumed a more active role in regulating India’s virtual digital asset (VDA) space. In December last year, 28 crypto firms had registered with the FIU in India to obtain operational approvals in the country. Later that month, the FIU issued show cause notices to Binance and Kraken among other crypto firms for initiating India operations without acquiring the necessary registrations.

Shortly thereafter, all crypto firms, both domestic and international, were required to register with FIU-IND to obtain legal operational status in India—establishing the FIU’s endorsement as a mark of legitimacy for VDA firms in the country.

“FIU-Qatar highly appreciated the IT system (FINNET 2.0) used by FIU-IND and mentioned that it is one of the most sophisticated systems used by any FIU. They expressed keenness to further understand the Private-Private Partnership Initiative from FIU-IND which facilitates the collaboration amongst private sector players in AML/CFT regime,The FIU unit of the UAE will be working with its’ the statement noted.

While India has taken a more gradual approach to finalising its crypto regulations in collaboration with the G20, the UAE has moved swiftly to regulate its crypto sector, which is currently valued at $2.48 trillion (roughly ₹2,08,78,724 crore).

Back in October – the UAE scrapped value added tax on crypto transactions.

The meeting of the UAE’s FIU comes just days after the country started intensified its crackdown on illegal and financially risky crypto activities. Earlier that month, Dubai’s Virtual Assets Regulatory Authority (VARA) issued a cease-and-desist order against seven crypto entities for operating without the necessary approvals.