Crypto Transactions to come under the ambit of Anti-Money Laundering Law in India

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Key takeaways:

  • Several cryptocurrency transactions are now covered by the Prevention of Money-Laundering Act
  • Data from transactions must be kept by operators for ten years and made available to authorities upon request.

While requiring Anti-Money Laundering (AML) standards for cryptocurrency is nothing new, it is only now that the Indian government has chosen to inform all interested parties of the requirement to abide by the country’s AML legislation.

Several cryptocurrency transactions, including the exchange, transfers, safekeeping, and management of virtual assets, are now covered by the Prevention of Money-Laundering Act (PLMA) 2002, according to a formal notice from the Ministry of Finance that was published in The Gazette of India on March 7. Financial services related to an issuer’s offer and the sale of virtual assets are also covered by the PMLA.

WazirX founder Nishchal Shetty tweeted that this is a positive step towards regulating the cryptocurrency business in India. He added:

“This also ensures all crypto businesses must perform necessary KYC, transaction monitoring etc as part of their process.”

The notification is brief, but the PMLA mandates that financial institutions maintain records of all transactions for the preceding ten years, provide these records to authorities upon request, and verify the identity of each client.

The notification, released as regulators around the globe tighten AML standards for cryptocurrency, will make it more difficult for Indian crypto companies to operate. And in recent years, it has already not been delightful. According to revised tax regulations, holdings and transfers of digital assets will be liable to a 30% tax starting in March 2022.s

Within ten days of introducing the new taxation policy, trading activity on significant cryptocurrency exchanges in India decreased by 70% and by almost 90% over the following three months. The strict tax laws pushed emerging cryptocurrency projects to leave India and drove cryptocurrency traders to offshore exchanges.

In February 2023, the Indian government once again demonstrated its unyielding stance on cryptocurrencies by outright prohibiting cryptocurrency sponsorships and advertising in the local women’s cricket competition. This followed a previous ban for the men’s cricket Premier League, which was implemented back in 2022.

In 2023, Nirmala Sitharaman, India’s finance minister, called for international action to regulate cryptocurrencies while the country was enjoying its first G20 presidency. She urged a concerted effort “for building and understanding the macro-financial implications,” which could be applied to change cryptocurrency regulation worldwide.

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