India imposes money laundering provisions on cryptos

Financial services associated with an issuer’s offer and sale of virtual assets also come under the Prevention of Money-Laundering Act

India has imposed money laundering provisions on the crypto currency sector, the most recent measure by the government to strengthen the supervision of digital assets.

On March 7, The Gazette of India issued a notification from India’s finance ministry, subjecting a variety of crypto transactions to the provisions of the Prevention of Money-Laundering Act (PLMA) 2002 — which include the exchange, transactions, safekeeping and administration of digital assets. Financial services associated with an issuer’s offer and sale of virtual assets also come under the Prevention of Money-Laundering Act.

The notification does not provide more details, but the Prevention of Money-Laundering Act requires financial institutions to maintain a record of all transactions for the last ten years, provide these records to officials if asked, and confirm the identity of all the clients.

Published as regulators globally are strengthening Anti Money Laundering standards for crypto, the notification will complicate the life of crypto firms in India. And it already has not been too easy in recent years. From March 2022, as per amended tax rules, digital assets holdings and transfers are subject to a 30 per cent tax.

​​Trading volume on leading crypto currency exchanges across India declined by 70 per cent within 10 days of the new tax policy. The strict tax policy led crypto traders to overseas exchanges and compelled budding crypto projects to move outside India.

While celebrating India’s first presidency of the G20, the country’s Finance Minister, Nirmala Sitharaman, urged global efforts to regulate crypto. Sitharaman called for a coordinated effort “for building and understanding the macro-financial implications,” which could be used to reform crypto regulation worldwide.