A new law will require cryptocurrency firms and exchanges to keep Know Your Customer (KYC) information and financial transactions for all of their clients for five years. This decision is seen as a positive step toward compliance and user safety on cryptocurrency platforms. Experts agree, however, that this move would dramatically raise the compliance costs of cryptocurrency exchanges.
The country's Computer Emergency Response Team (CERT-in), which is supervised by the Ministry of Electronics and Information Technology, has announced new guidelines requiring VPN providers and cryptocurrency exchanges to preserve a wide range of data about their users. The new restrictions are slated to go into effect in late June.
The new restriction applies solely to cryptocurrency exchanges that store crypto wallets on behalf of their consumers. A custodial cryptocurrency wallet is one in which your assets are held in trust for you. This implies that your private keys will be held and managed by a third party on your behalf. In other words, you will not have complete control over your cash, nor will you be able to sign transactions.
"Exchanges would be required to preserve data for five years, which, given the number of deals that occur on crypto exchanges, will drive up expenses because the new regulation requires all financial transaction data to be stored." This adds to the cost of exchanges," noted Sharat Chandra, Vice President of EarthID. Another problem would be storing the data locally in India, particularly with regard to foreign exchanges. Previously, payment giant Mastercard was grappling with the issue of keeping customer data locally.
This development also signals that the government is in some way moving towards framing regulation. But guidelines can move past many regulations in upcoming months.