Indian Government Brings Crypto Transactions Under Money Laundering Laws.
The Indian federal government has recently taken regulatory action to bring virtual digital asset (VDA) transactions, which include cryptocurrencies, under the coverage of the Prevention of Money Laundering Act (PMLA) 2002. Any code or token created using cryptographic techniques with the promise or representation of intrinsic worth is called a virtual digital asset.
The Finance Ministry’s Gazette Notification states that anti-money laundering laws have been practiced for cryptocurrency trading, storage, and related financial services.
The new regulations would require Indian cryptocurrency exchanges to notify the Financial Intelligence Unit India of any questionable behavior (FIU-IND).
The PMLA, 2002 will now apply to transactions involving “exchange between virtual digital assets and fiat currencies, exchange between one or more types 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 economic services related to an issuer’s offer and sale of a digital asset,” according to the notification.
The action is in keeping with a global trend that calls for digital asset platforms to adhere to anti-money laundering regulations comparable to those that apply to other regulated companies like banks or stock brokers.
Over the past few years, the use of digital currency and assets like NFTs (non-fungible tokens) has spread around the globe. With the introduction of cryptocurrency exchanges, trading in these assets has grown.
Unfortunately, India did not have a clear policy regarding regulating or taxing such asset classes until last year.
The necessity to create a common operating procedure for regulating crypto assets was something that India was considering with the G-20 members, according to Finance Minister Nirmala Sitharaman’s testimony to Parliament last month.
She had claimed that Web3 and crypto assets were still relatively new and developing industries that needed substantial international cooperation to be fully regulated.
Since cryptocurrencies are, by definition, borderless, international cooperation is necessary to prevent regulatory arbitrage. Because of this, only with major international cooperation on assessing the risks and advantages and developing common taxonomies and standards can any legislation for regulation or banning be effective.
She had included a 30% tax on revenue from transactions in these assets in the Budget for 2022–2023. She also instituted a 1% TDS (tax deducted at source) on transactions in these asset types above a certain threshold to bring such assets into the tax net. Crypto and digital asset gifts were taxed as well.