Research Center Highlights Overvaluation in Overseas Crypto Holdings Reported to Korean Tax Agency

28 crypto service providers register with India’s FIUIn India, 28 entities providing services related to virtual digital assets (VDAs) have successfully registered with the Financial Intelligence Unit (FIU), the body responsible for combating money laundering in the world’s most populous country.Notable names in this list include Neblio Technologies, more commonly known as CoinDCX, Zanmai Labs, the company responsible for the WazirX crypto platform, Bitcipher Labs’ CoinSwitch, Nextgendev Solutions and Awlencan Innovations India’s Zebpay.Photo by Big G Media on UnsplashA need to register as ‘reporting entities’This information comes in response to a question posed in the Lok Sabha (India’s lower house of Parliament), where the government emphasized the significance of these entities complying with the Prevention of Money Laundering Act (PMLA). In March, the government had formally designated companies dealing in VDAs, crypto exchanges and related intermediaries as “reporting entities” under the PMLA.According to the notification, crypto exchanges and their intermediaries are obligated to conduct Know Your Customer (KYC) procedures for their clients and platform users. This includes maintaining KYC details, identity documents, account files and business correspondence records with clients.Offshore exchanges required to registerMinister of State for Finance Pankaj Chaudhary mentioned that the registration process for VDA service providers catering to the Indian market is underway. Non-compliance with these regulations may result in appropriate action under the PMLA. It has been clarified that offshore crypto exchanges operating in India are required to adhere to these guidelines. Despite that, none of the 28 entities who have registered so far appear to be offshore companies.Commenting on the development via the X social media platform, Sumit Gupta, Co-Founder of CoinDCX, wrote:”Emphasizing compliance to PMLA is vital for the safety and financial integrity of Indians, as dealing with non-registered platforms exposes citizens to nefarious actors, putting their finances at risk.” . . . “It’s encouraging to witness the Government initiating actions against non-compliant offshore entities.”While steps to provide guidelines for the industry are largely positive, the Reserve Bank of India (RBI) has been vocal in its criticism of cryptocurrencies and calls for potential bans have cast a shadow over the industry in India. The recent collapse of prominent platforms like FTX have not been helpful, only serving to exacerbate concerns relative to India’s crypto ecosystem.The negative sentiment, coupled with an ongoing funding winter, has resulted in the closure of operations for some crypto platforms, including Pillow and WeTrade, this year. Firms like CoinSwitch and Gupta’s CoinDCX have had to reduce headcount in 2023 amid challenging market conditions.Despite these challenges, there are also positive signs. A recent report by blockchain analytics firm Chainalysis found that India has been the frontrunner more recently in terms of crypto adoption in Asia.This latest development provides guidelines where anti-money laundering processes are concerned for crypto firms in India. However, the government needs to follow through with a complete regulatory framework for the industry. The Indian courts recently declined to act on such a petition on the basis that it falls within the remit of the country’s legislature and is outside the purview of the courts.

Crypto-Friendly Xapo Bank Enters Indian MarketXapo Bank, a cryptocurrency bank based in Gibraltar, has set its sights on India and plans to offer banking and cryptocurrency services in the country.Xapo, which claims to be the first bank in the world to integrate traditional private banking with crypto, issued a press release which was published via Bloomberg on Thursday to announce the development.Photo by Julian Yu on UnsplashMassive market opportunityWith a population of over 1.3 billion, India presents a massive opportunity for Xapo Bank, which is backed by prominent investors like SoftBank, DST Global, and Ribbit Capital. This move comes at a time when India has seen impressive foreign inflows of $15.5 billion in the first quarter of 2023.The CEO of Xapo Bank, Seamus Rocca, suggested that the absence of conventional banking services in certain parts of South Asia has created a void that Xapo Bank aims to fill. By providing innovative financial products and services, the bank hopes to empower individuals and businesses with access to reliable and inclusive banking solutions.Rocca stated that the move “represents an opportunity to provide our hybrid banking and investment solutions to its large underserved populations, bridging an important gap in the region’s financial systems and allowing its savvy savers, investors, and professionals the freedom to explore their financial potential with a single mobile application.”Competitive interest rate offeringOne of the attractive features of Xapo Bank for customers in India is its competitive interest rates on deposits. The bank offers attractive returns, with a yearly interest rate of 4.10% on US dollar deposits and 1.00% on Bitcoin deposits. Notably, the daily interest payments on Bitcoin deposits are distributed in the smallest denomination of the cryptocurrency, a satoshi.Xapo Bank’s expansion into India aligns with the country’s projected economic growth of 6.3%, according to Fitch Ratings. Despite the worldwide economic downturn, India’s GDP demonstrated robust growth of 6.1% in the first quarter, showcasing the country’s resilience.Government policy challengesHowever, Xapo Bank will face challenges as it enters the Indian market. The world’s most populous country has implemented strict measures regarding cryptocurrencies, including a 30% tax on all cryptocurrency income and the elimination of deductibility for losses. Such regulations could potentially impact Xapo Bank’s operations and profitability in India.Authorities like the country’s central bank, the Reserve Bank of India (RBI), have been more inclined to encourage the financial services sector to adopt blockchain technology rather than offer cryptocurrencies directly. Earlier this month, American multinational financial services company JPMorgan Chase partnered with six major Indian banks in a blockchain offering that aims to improve the interbank settlement process.Nevertheless, Xapo Bank remains undeterred, recognizing the immense potential of India’s growing economy and the urgent need for accessible financial services. The bank’s expansion promises to create opportunities for individuals and businesses across the nation, contributing to India’s economic development and financial inclusion.Moreover, Xapo Bank’s entry into India reflects a broader trend of fintech innovation and the convergence of traditional banking and digital currencies. As the world becomes increasingly interconnected, financial institutions like Xapo Bank are reshaping the financial services landscape by offering forward-thinking solutions that bridge gaps, ultimately empowering individuals and fostering economic growth.

Korea Joins OECD’s CARF initiative to enhance crypto tax complianceThe South Korean Ministry of Economy and Finance issued a press release to declare the country’s involvement in the Crypto-Asset Reporting Framework (CARF). This program, developed by the Organization for Economic Co-operation and Development (OECD), is designed to promote tax compliance and combat tax evasion in the realm of cryptocurrency. The initiative brings together 48 countries and jurisdictions, such as France, Germany, Japan, the United Kingdom and the United States.Photo by Nataliya Vaitkevich on PexelsTarget year of 2027In the joint statement released on Nov. 10, the participants of the CARF expressed their commitment to its widespread and timely implementation, aiming to enhance the effectiveness of the regime. They plan to align their domestic laws and enforce agreements by 2027, the year targeted by the OECD for exchanging relevant information. The statement also encouraged other jurisdictions to participate in this global effort.Updating laws and activating agreementsKorea’s commitment to international cooperation, as indicated in the joint statement, shows its intention to update domestic laws and activate exchange agreements. This preparation will pave the way for the exchange of crypto-asset transaction information to commence in 2027, adhering to the OECD’s proposed timeline. Such a step is anticipated to significantly contribute to the broad implementation of the CARF. The Economy Ministry stated that Korea is committed to ongoing participation in international efforts aimed at preventing tax evasion and enhancing tax transparency.In September, during a tax administration forum in Seoul, experts suggested that Korea’s potential participation in the OECD’s CARF would require more than just legislative amendments. They highlighted the necessity for Korea to develop a cooperative system involving both virtual asset service providers (VASPs) and regulatory authorities, explaining that this approach would ensure a smooth and effective implementation of the CARF in Korea.