Introduction to Crypto Licensing in India
The Union Budget 2022 brought much-needed clarity to cryptocurrency taxation in India. While cryptocurrencies weren't taxed earlier, the new regulations have established a framework for crypto businesses. This guide explores how to legally operate a cryptocurrency exchange or trading company in India's evolving regulatory landscape.
Understanding Crypto Licensing Requirements
Currently, India doesn't have specific crypto licensing laws, but businesses must comply with existing regulations:
- Company Registration: Mandatory under the Companies Act 2013
- Financial Compliance: Anti-Money Laundering (AML) and KYC regulations
- Taxation: Virtual Digital Assets (VDA) tax provisions
Step-by-Step Company Registration Process
1. Establishing a Private Limited Company
Key Requirements:
- Minimum 2 directors (maximum 200)
- Shareholder liability limited to their shares
- Maximum 300 shareholders allowed
Registration Steps:
Obtain Digital Signature Certificate (DSC)
- Required for online filing of registration documents
- Issued by government-certified agencies
Get Director Identification Number (DIN)
- Unique identifier for company directors
- Obtained through SPICe+ or INC-32 forms
Select a Unique Company Name
- Must end with "Pvt Ltd"
- Cannot resemble existing company names
File Incorporation Forms
SPICe+ or INC-32 for:
- DIN allocation
- Company name reservation
- PAN/TAN application
Submit MOA and AOA
- Memorandum of Association (company charter)
- Articles of Association (company rules)
Essential Documents for Registration
For Indian Nationals:
- Affidavit on stamp paper
- Office address proof
- Director's identity proof (Passport/Driver's License/Voter ID)
- PAN card and Aadhar card
- Contact details of directors/shareholders
For Foreign Nationals:
- Passport copies
- Address proof
- Contact details
Additional Regulatory Requirements
Financial Intelligence Unit (FIU) Registration
Process Overview:
- Submit application with required documents
- Register reporting entity and principal officer
- Obtain certification after verification
Key Documents:
- Company: Incorporation certificate, MOA/AOA
- Partnership: Partnership deed, registration certificate
- Trust: Trust deed, registration certificate
Consequences of Non-Compliance:
- Monetary penalties
- Potential URL blocking by MeitY
- Warning notices
- Mandatory compliance reporting
Monthly Reporting Obligations
| Report Type | Description | Threshold | Due Date |
|---|---|---|---|
| Cash Transaction | Cash transactions | ₹10,00,000+ | 15th of next month |
| Counterfeit Currency | Forged currency reports | All cases | 15th of next month |
| NPO Transactions | Non-profit org transactions | ₹10,00,000+ | 15th of next month |
| Cross-Border Transfers | International transfers | ₹5,00,000+ | 15th of next month |
| Property Transactions | Immovable property | ₹50,00,000+ | 15th of next quarter |
| Suspicious Transactions | Any suspicious activity | All cases | Within 7 days |
Legal Entity Identifier (LEI) Requirements
Key Facts:
- 20-character unique identifier for financial transactions
- Mandatory for transactions ≥ ₹50 crore
- Obtainable from LEIL (RBI-recognized issuer)
- Required for all non-individual transactions
Exemptions:
- Not required for individual-to-individual transactions
- Government undertakings must comply for large transactions
Risk Management Framework
Essential Departments for Crypto Companies
Accounting & Compliance
- Handles GST, income tax, ROC filings
- Manages KYC/AML requirements
Legal & Regulatory
- Tracks evolving crypto regulations
- Handles legal cases
Operations
- Manages daily trading activities
- Processes payments
Security & Risk Assessment
- Implements cybersecurity measures
- Conducts vulnerability assessments
Security Best Practices
- Multi-factor authentication
- Regular software updates
- Employee security training
- Incident response planning
- Blockchain security solutions
Starting a Crypto Exchange: Key Considerations
👉 Essential tips for crypto exchange success
Implement robust customer verification:
- OTP/Aadhar verification
- Video KYC processes
- Establish escrow accounts for transactions
- Draft clear terms and conditions
- Maintain transparent financial reporting
Indian Exchange Requirements:
- Publish earnings/loss statements
- Disclose cryptocurrency holdings
- Report customer deposits
- Maintain transaction records
FAQ Section
Q: Is cryptocurrency legal in India?
A: While not officially legalized, cryptocurrencies aren't prohibited. The government has established taxation and regulatory frameworks for crypto businesses.
Q: What's the minimum capital requirement for a crypto exchange?
A: There's no specified minimum, but sufficient capital is needed for technology infrastructure, compliance, and operational costs.
Q: How long does FIU registration take?
A: Typically 4-6 weeks after complete documentation submission, depending on application volume.
Q: Are foreign investors allowed in Indian crypto businesses?
A: Yes, through proper company registration and compliance with FDI regulations.
Q: What taxes apply to crypto businesses?
A: 30% tax on VDA gains, 1% TDS on transactions, plus standard corporate taxes.
Q: How often must we file FIU reports?
A: Monthly for most transaction types, with specific deadlines for each report category.
👉 Learn more about crypto compliance
Note: This guide provides general information and doesn't constitute legal advice. Consult with qualified professionals for specific guidance.