The Open Question
India extended the Prevention of Money Laundering Act, 2002 to virtual digital asset service providers. This brought exchanges, custodial wallet providers and similar intermediaries within the reporting-entity framework. However, the amendment did not clearly address decentralized business structures where the service provider never controls the user’s private keys or funds, such as self-custodial wallet models. India is not alone in facing this uncertainty. Regulators worldwide are still working out how anti-money laundering rules should apply to different decentralized crypto business models.
Our Framework
Ikigai Law follows a structured approach to determine whether a virtual digital asset (VDA) product falls within India’s anti-money laundering framework. We examine how the product works in practice: who holds the private keys, who can move the funds and what information the provider can access. We then assess these features against the legal triggers for reporting-entity status. The result is a practical, risk-based position that clients can rely on and update as the regulatory framework evolves.
Applying It in Practice
We have applied this approach to custodial exchanges, self-custodial wallet providers and hybrid products. In a recent matter, we helped a global cryptocurrency exchange assess the AML implications of its self-custodial wallet product before launching it in India. While the details of each client’s assessment remain confidential, the underlying approach can be applied across products. The Ikigai Law team on this matter comprised of Anirudh Rastogi, Astha Srivastava and Akshat Tenneti.
“VDA businesses don’t need us to guess at an answer the law hasn’t given yet. They need a defensible, documented process for reaching one — something that holds up if a regulator asks about it later, and that can be updated as the law catches up.”
— Anirudh Rastogi, Managing Partner
For any queries, reach out to us at contact@ikigailaw.com
Image credits: AI generated
