Indian Government Brings Crypto Transactions Under Money Laundering Laws
Virtual digital assets are defined as any code or number or token generated via cryptographic means with the promise or representation of having inherent value.
Information:
About the notification:
In a new regulatory as well as a revolutionary move, the Central government has bought a range of virtual digital asset (VDA) transactions, including cryptocurrencies, under the umbrella of the Prevention of Money Laundering Act (PMLA) 2002.
As per the gazette notification, issued by the Finance Ministry, the anti-money laundering legislation has been applied to crypto trading, safekeeping and associated financial services.
With this new rules, Indian crypto exchanges will have to report any suspicious activity to the Financial Intelligence Unit India (FIU-IND).
Statement:
Words from notification:
“Exchange between virtual digital assets and fiat currencies, exchange between one or more forms of virtual digital assets, transfer of virtual digital assets, safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets, and participation in and provision of financial services related to an issuer’s offer and sale of a virtual digital asset" will be now be covered by PMLA, 2002, said the notification.
Words from Nirmala Sitharaman:
In the previous month, Finance Minister Nirmala Sitharaman told Parliament: "India was discussing with the G-20 member countries the need to develop a standard operating protocol for regulating crypto assets."
She had said: "crypto assets and Web3 are relatively new and evolving sectors and require significant international collaboration for any specific legislation on these sectors to be fully effective."
Information:
About the significance:
The move is in accordance with the worldwide trend of requiring digital-asset platforms to follow anti-money laundering standards. This is similar to those followed by other regulated entities such as banks or stock brokers.
Digital currency as well as assets like non-fungible tokens (NFTs) have gained traction over the last few years, globally. As per reports, Trading in such assets has augmented manifold with the launch in cryptocurrency exchanges.
However, till last year, India did not have a proper policy on either regulating or taxing these asset classes.
As per definition, any Crypto assets are borderless and need international collaboration to stop regulatory arbitrage. Therefore, any legislation to regulate or ban can only be effective with significant international collaboration on the evaluation of the risks and benefits along with evolution of common taxonomy and standards.
