India Mandates Cybersecurity Audits for Crypto Firms: A New Era of Digital Accountability
India cracks down on crypto vulnerabilities—mandatory cybersecurity audits now in force for all digital asset firms.
Regulatory Shift
No more optional security measures. The government's pushing full transparency—audits become non-negotiable for every exchange, wallet provider, and trading platform operating within Indian borders.
Industry Impact
Expect compliance costs to spike while investor confidence gets a badly-needed boost. Firms scrambling to meet deadlines face hefty penalties for non-compliance—because nothing says 'secure' like government-mandated paperwork.
Finance professionals smirk—yet another layer of bureaucracy in an industry that supposedly thrives on decentralization. Because nothing protects digital assets like traditional oversight, right?
Why is it necessary?
Cryptocurrency crimes are on the rise in India. As per the Economics Times, local exchange Giottus reported that cryptocrimes account for nearly 20–25% of all cybercrime cases in India.
Recent hacks have seen criminals exploit loopholes to steal digital assets. They then route the stolen funds through complex global networks, darknet markets, privacy coins, and coin-mixing services to erase transaction trails.
In the previous month, the Indian Parliament’s Standing Committee on Home Affairs released its 254th Report titled “Cyber Crime – Ramifications, Protection and Prevention.” The report highlights how cryptocurrencies are increasingly being exploited in financial frauds, money laundering, ransomware attacks, and human trafficking. The term “crypto” appears repeatedly throughout the report, consistently in a negative context.
Questioning the cybersecurity audits
Functioning these audits is a step forward. However, the main question is whether cybersecurity auditors, who usually review banks and brokerages, can spot security gaps in crypto platforms.
One key measure for these platforms is protecting the ‘private key,’ the alphanumeric code that controls access to funds. Auditors will need to check how and where these keys are stored.
Still, industry voices see this as a positive step. “The introduction of cyber security audits in all likelihood is triggered by recent crypto thefts in a few exchanges,” said Harshal Bhuta, partner at CA firm P. R. Bhuta & Co. He also mentioned the CERT-In directions from April 28, 2022, require keeping logs and storing subscriber data for a set period. This will help authorities track funds hidden through cryptocurrency transactions.
Purushottam Anand, Advocate and Founder of Crypto Legal, expressed that the FIU has also replaced the earlier “Fit & Proper” certificate with a new accreditation called “Partner Accreditation for Compliance & Trust” (PACT).” He noted, “It is expected that FIU will provide additional guidance to registered entities on the scope and parameters for such assessments.
Crypto regulation needed in India
India has imposed strict reporting rules for crypto. Due to this setback, the industry continues to face challenges such as high taxes and a lack of a dedicated regulatory framework.
Recently, Mudrex, one of India’s largest crypto investment platforms, surveyed 9,352 people on crypto regulation, taxation, and investment trends. The study found that 93% of respondents support regulation. Of these, 56% want full investor-protection frameworks, 24% prefer lighter oversight to encourage innovation, and 13% favor regulation limited to taxation.
Some industry reports suggest the government could adopt a segmented approach to regulation, treating Bitcoin, stablecoins, and utility tokens differently based on their use.
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