INDIA Law and Practice Contributed by: Shilpa Mankar Ahluwalia, Purva Anand and Ansh Jain, Shardul Amarchand Mangaldas & Co
5. Payment Processors 5.1 Payment Processors’ Use of Payment Rails Payment processors primarily rely on existing pay - ment rails for processing and completing payment transactions. For example, payment processors such as payment aggregators use the existing payment rails such as card networks (for card transactions), NEFT and RTGS (for online banking transactions), etc, to process payments. TPAPs for UPI transactions rely on the UPI (operated by the NPCI) for processing and completing UPI payment transactions. 5.2 Regulation of Cross-Border Payments and Remittances Cross-border payments and remittances are primarily regulated under the 1999 Foreign Exchange Manage - ment Act (FEMA) and the rules, regulations and cir - culars issued thereunder. FEMA prescribes different regulations and compliance requirements, depending on the nature of the transaction (ie, whether a capital account transaction or a current account transaction) and whether remittances are inbound to India or out - bound from India. Such transactions are undertaken by AD Banks, authorised under FEMA to deal in for - eign exchange on behalf of their clients. For personal remittances inbound to India, residents may use the facility to receive such payments through money transfer operators. RBI-approved PA-CBs also facilitate cross-border payments in exchange for goods and services. Addi - tionally, UPI global is the latest entrant in the cross- border payments space in India (see 1.1 Evolution of the Fintech Market ). 6. Marketplaces, Exchanges and Trading Platforms 6.1 Permissible Trading Platforms Under Indian law, the key marketplaces and trading platforms for trading in securities are registered stock exchanges and privately managed platforms operated by stockbrokers, each of which is registered with SEBI.
Stock exchanges facilitate trade in a number of assets such as equity, equity derivatives, currency deriva - tives, commodity derivatives, debt securities, units in pooled investment vehicles such as infrastructure investment trusts and real estate investment trusts. Different asset classes are governed by varying regu - lations, depending on the nature of the asset (eg, equi - ty-linked, debt-linked or pooled investment vehicle). The principal regulators for stock exchanges are SEBI, the Ministry of Finance and the RBI, depending on the asset class being traded on the stock exchange. Stock exchanges are highly regulated entities and also operate as quasi-regulators, to some extent, by enact - ing their own separate by-laws and guidelines which govern trading in securities on the stock exchange. In addition to traditional stock exchanges, the RBI has also recognised electronic trading platforms for transactions in financial market instruments regulated by the RBI. Such electronic trading platforms must be registered with the RBI and must comply with minimum capital norms, technological standards and other safeguards. 6.2 Regulation of Different Asset Classes The RBI and the GOI exhibit a marked reluctance to acknowledge cryptocurrency as a legitimate form of currency in India. However, their stance on cryptocur - rency has softened from a “complete ban” to a “regu - lation” approach, in line with the global developments in the cryptocurrency space. Indian regulators are therefore now focused on regulating crypto-intermediaries (including crypto- exchanges) with rules centred around KYC require - ments, consumer protection, disclosures and report - ing requirements. The GOI recently brought all virtual asset service providers (VASPs, which include crypto- exchanges) under the ambit of the PMLA. See 6.1 Permissible Trading Platforms . 6.3 Impact of the Emergence of Cryptocurrency Exchanges The Financial Intelligence Unit of India (FIU-Ind) sub - sequently published the AML & CFT Guidelines for Reporting Entities Providing Services Related to Vir -
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