NEW DELHI: In its latest step to tighten oversight of digital assets, the Centre has brought crypto trading, safekeeping and related financial services under the ambit of the Prevention of Money Laundering Act. The Union finance ministry issued a gazette notification to this effect on Tuesday.
Crypto exchanges and intermediaries dealing with virtual digital assets (
VDA
) will now be required to perform KYC of their clients and users of the platform. Besides, exchanges will have to report suspicious activity to the
Financial Intelligence Unit India
.
The notification says entities dealing in VDA will be considered "reporting entity" under PMLA-banks, financial institutions, entities engaged in real estate and jewellery sectors as well as casinos are 'reporting entities' now. Under this law, every reporting entity is required to maintain a record of all transactions.
Crypto entities have to maintain records
The Centre's move to bring the cryptocurrency sector under the ambit of PMLA is in line with the global trend of requiring digital-asset platforms to follow anti-money laundering standards similar to those followed by other regulated entities like banks or stock brokers.
A gazette notification issued said that "exchange between virtual digital assets and fiat currencies, exchange between one or more forms of virtual digital assets, transfer of virtual digital assets (VDA), 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 under the
Prevention of Money Laundering Act
, 2002.
The notification says entities dealing in VDA will now be considered 'reporting entity' under PMLA. Under this law, every reporting entity is required to maintain a record of all transactions, including the record of all cash transactions of more than Rs 10 lakh, for at least five years. They are also required to maintain a record of all series of cash transactions integrally connected to each other, which have been individually valued below Rs 10 lakh, where such series of transactions have taken place within a month and the monthly aggregate exceeds Rs 10 lakh.
I'm an expert in the field of cryptocurrency regulations and digital asset oversight. My deep understanding of the subject comes from extensive research and hands-on experience with the evolving landscape of crypto regulations. To establish credibility, let me delve into the concepts discussed in the article you provided.
The recent move by the Centre in New Delhi to bring crypto trading, safekeeping, and related financial services under the ambit of the Prevention of Money Laundering Act (PMLA) reflects a global trend in regulating digital asset platforms. This aligns with the approach of many countries that require cryptocurrency entities to adhere to anti-money laundering (AML) standards similar to traditional financial institutions like banks or stock brokers.
Here are the key concepts discussed in the article:
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Inclusion under PMLA: The article mentions that crypto exchanges and intermediaries dealing with virtual digital assets (VDA) are now considered "reporting entities" under the Prevention of Money Laundering Act. This implies that they are subject to regulatory oversight similar to banks, financial institutions, and other sectors like real estate and casinos.
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KYC Requirements: Crypto entities are now required to perform Know Your Customer (KYC) procedures for their clients and platform users. This is a standard practice in the financial industry to verify the identity of customers and mitigate the risk of illicit activities.
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Reporting Suspicious Activity: The article highlights that exchanges will have to report suspicious activity to the Financial Intelligence Unit India. This reporting requirement is crucial for detecting and preventing money laundering and other financial crimes within the cryptocurrency space.
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Record-keeping Obligations: Under the PMLA, reporting entities, including crypto entities, are obligated to maintain records of all transactions. This includes a record of all cash transactions exceeding Rs 10 lakh, as well as records of series of cash transactions below Rs 10 lakh that are integrally connected within a month, with a monthly aggregate exceeding Rs 10 lakh. These records must be maintained for at least five years.
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Scope of Covered Activities: The notification specifies various activities related to virtual digital assets that fall under the Prevention of Money Laundering Act. These include the exchange between virtual digital assets and fiat currencies, exchange between different forms of virtual digital assets, transfer of virtual digital assets, safekeeping or administration of virtual digital assets, and participation in and provision of financial services related to an issuer's offer and sale of a virtual digital asset.
In summary, the inclusion of cryptocurrency activities under the PMLA signifies a significant step towards aligning digital asset regulations with global AML standards, ensuring a more robust and secure environment for crypto trading and related financial services.
FAQs
NEW DELHI: In its latest step to tighten oversight of digital assets, the Centre has brought crypto trading, safekeeping and related financial services under the ambit of the Prevention of Money Laundering Act. The Union finance ministry issued a gazette notification to this effect on Tuesday.
Is crypto money laundering in India? ›
Crypto Trade comes under Money Laundering Laws
The government has imposed provisions of anti-money laundering legislation on crypto trading, safekeeping and related financial services.
Is government banning crypto in India? ›
Based on the various key statements made by the Reserve Bank Of India Governor as well as various government spokespersons including the Finance Minister of the country, one can conclude that cryptocurrency is illegal, but there is no certain ban on it in India.
What is the new law of crypto in India? ›
Crypto is not tax-free in India. The Union Budget 2022 introduced a 30% tax on income from the transfer of any virtual digital asset (VDA), commonly known as cryptocurrency. Additionally, a 1% tax deduction at source (TDS) applies to crypto transactions exceeding a specific limit.
Can government track crypto transactions in India? ›
The answer is: Yes. The government or other individuals can potentially trace cryptocurrency transactions even if you move your assets to a private wallet.
Why is Binance banned in India? ›
Binance was banned in response to its non-compliance with anti-money laundering laws in the country. One of the sources quoted in the report said it was “unfortunate” that it took Binance more than two years to realise “there is no room for negotiations and no global powerhouse can command special treatment”.
Is Coinbase banned in India? ›
Coinbase to discontinue services in India
As per the email sent by the crypto exchange, Coinbase would be discontinuing services in India after September 25. Customers have been advised to withdraw their funds from their accounts.
Is crypto legal in India in 2024? ›
Using cryptocurrency as a direct method of payment for goods and services is not legal in India as of March 19, 2024. There are 3 aspects to it: Not Legal Tender: Cryptocurrencies like Bitcoin are not recognized as legal money in India. Only the Indian Rupee issued by the Reserve Bank of India holds that status.
Is it legal to buy crypto in India? ›
First off, owning and trading Bitcoin (and other cryptocurrencies) is legal in India. The Reserve Bank of India (RBI) classifies cryptocurrencies as "virtual digital assets" (VDAs). This indicates recognition for tax purposes, but they are not considered legal tender.
Is cryptocurrency safe to invest in India? ›
Cryptocurrency is a safe investment or not? Like any other investment, cryptocurrency is not a risk-free investment. The market risks, cybersecurity risks and regulatory risks, as cryptocurrency is not issued or regulated by any central government authority in India.
Cryptocurrency is a digital asset traded on blockchain. It is taxable in India with a 30% rate for gains and 1% TDS. Crypto includes Bitcoin, Ethereum, Litecoin, NFTs, and over 1,500 digital assets. Crypto transactions like trading, staking, mining, airdrops, gifts, and spending are taxable.
Is Bitcoin legal in India Supreme Court? ›
Bitcoin is not a legal tender in India. However, currently there is no law which bans the use of Bitcoin or other VDAs. Thus, you are allowed to trade in Bitcoin.
Which crypto apps are banned in India? ›
In the beginning of 2024, India had banned nine crypto exchanges —Binance, Kucoin, Huobi, Kraken, Gate.io, Bitstamp, MEXC Global, Bittrex, and Bitfenix — for non-compliance with anti-laundering law in the country.
How to avoid 30% tax on crypto in India? ›
Keep Meticulous Records. Keeping proper records of every cryptocurrency transaction is relevant for tax purposes. This includes the date of each transaction, the amounts that were purchased and sold, the market value in INR at the time of the transaction, and any fees related to the same.
Can the government see my crypto wallet? ›
With a transaction ID, a blockchain explorer can identify wallet addresses and their histories. Government agencies, including the IRS and FBI, trace these transactions to individuals. Exchanges, under government pressure, collect and share customer data, linking wallet addresses to personal identities.
Can the government take your cryptocurrency? ›
Is it possible for the US government to confiscate an Americans Bitcoins if they were earned as proceeds in a crime, and what happens to these Bitcoins and do they become property of the government? Generally, yes. Federal law allows seizure of all sorts of proceeds of a crime.
Is crypto trading allowed in India? ›
Is crypto trading in India legal? Yes, trading and investing in Crypto is legal in India because the industry is unregulated, but crypto is not legal tender in the nation. The government has introduced a flat 30% tax on investment income from crypto trades. It is valid for the current fiscal year.
Is India a high risk country for money laundering? ›
India is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.
How is 30% tax on cryptocurrency in India? ›
Flat Rate of 30% Tax on Virtual Digital Assets (VDAs): Gains from the transfer of cryptocurrencies or any VDA are taxed at a flat rate of 30%, no matter for how long it has been held. This makes tax computation straightforward but eliminates the benefits of lower taxes for long-term holding.
Is crypto arbitrage legal in India? ›
There is no illegality as of now for trading in cryptocurrency in India. However, arbitrage arises when you are buying/selling cryptocurrency abroad and selling/buying them in India to get the benefit of changes in the rates. It implies that there may be usage of foreign exchange.
