Crypto in India: Cryptocurrency trades are now covered by money laundering laws

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By A D

As part of its efforts to strengthen its oversight of digital assets, the Indian government has now implemented money laundering regulations for crypto and virtual assets.

The Finance Ministry recently announced in a gazette notification that financial services relating to virtual digital assets, such as crypto trading and custody, will henceforth be subject to anti-money laundering laws. As a result, Indian cryptocurrency exchanges will have to inform the Financial Intelligence Unit India of any questionable activity (FIU-IND). This is in line with a global movement to impose anti-money laundering requirements on platforms for digital assets that are comparable to those employed by other regulated organisations like banks and stockbrokers.
The Prevention of Money-laundering Act of 2002 will now apply to participation in and the provision of financial services associated to an issuer’s offer and sale of a virtual digital asset. Additionally, the notification said that the term “virtual digital asset” would be defined in accordance with Clause (47A) of Section 2 of the Income-Tax Act of 1961. (43 of 1961).

Many players in the cryptocurrency sector have applauded the action, viewing it as a step towards regulating the sector in India. The PMLA’s compliance and record-keeping requirements will be fully felt by cryptocurrency exchanges that lack internal compliance rules. This measure fits with a global trend of higher compliance demands on cryptocurrency exchanges to add accountability and stop shady trades.

Many players in the cryptocurrency sector have applauded the action, viewing it as a step towards regulating the sector in India. The PMLA’s compliance and record-keeping requirements will be fully felt by cryptocurrency exchanges that lack internal compliance rules. This measure fits with a global trend of higher compliance demands on cryptocurrency exchanges to add accountability and stop shady trades.

Many players in the cryptocurrency sector have applauded the action, viewing it as a step towards regulating the sector in India. The PMLA’s compliance and record-keeping requirements will be fully felt by cryptocurrency exchanges that lack internal compliance rules. This measure fits with a global trend of higher compliance demands on cryptocurrency exchanges to add accountability and stop shady trades.

Many players in the cryptocurrency sector have applauded the action, viewing it as a step towards regulating the sector in India. The PMLA’s compliance and record-keeping requirements will be fully felt by cryptocurrency exchanges that lack internal compliance rules. This measure fits with a global trend of higher compliance demands on cryptocurrency exchanges to add accountability and stop shady trades.

Also read: India preparing for Crypto Framework

The digital rupee is india's first step towards embracing crypto and other digital assets
Digital Rupee, the CBDC of India, was recently launched in a wholesale pilot segment. photo credits: smartprix

The Crypto Scenario in India
India didn’t have a defined policy for taxing or regulating these asset groups until 2022. However, in an effort to regulate, the Finance Bill added a penalty for failure to pay Tax Deducted at Source (TDS) on VDAs under section 271C of the Income Tax Act. India introduced a 30% tax on profits from transactions in digital assets in its budget for 2022–2023. To bring such assets under the tax net, a 1% TDS was also implemented on transactions in such asset types above a specific threshold. After 10 days of the new tax policy, trading volume on significant cryptocurrency exchanges in India decreased by 70%, and by approximately 90% over the following three months. The rigid tax policy drove crypto traders to offshore exchanges and forced budding crypto projects to move outside India.

India has been looking on techniques to discover its CBDC. The wholesale segment pilot for the digital rupee was launched by the RBI, the central bank and regulatory body of India, on November 1, 2022, enrolling 50,000 customers and 5,000 merchants for in-the-field testing. Since then, 800,000 transactions totaling over $134 million have been made using wholesale CBDCs.

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