• India’s Ministry of Finance has issued a gazette notifying that certain crypto activities will be subject to the Prevention of Money Laundering Act, 2002 (PMLA).
• Crypto insiders have praised this move as positive for the sector, saying it will help prevent virtual digital assets from being misused by bad actors.
• India recently led discussions on cryptocurrency regulation among G20 finance ministers and central bank governors, asking the IMF and FSB to collaborate on a joint paper to help countries formulate comprehensive crypto policies.
India Recognizes Crypto Transactions Under PMLA
India’s finance ministry has announced that crypto transactions will be covered under the Prevention of Money Laundering Act, 2002 (PMLA). The gazette issued by the Ministry of Finance states that certain crypto activities will fall under PMLA when carried out for or on behalf of another natural or legal person in the course of business.
What Activities Are Covered?
The exchange between virtual digital assets and fiat currencies, exchanges between one or more forms of virtual digital assets, transfers of virtual digital assets, safekeeping or administration of virtual digital assets and participation in financial services related to the offer and sale of virtual digital assets are all covered under this law.
Industry Reactions
Crypto insiders have welcomed this move as a positive step towards compliance for the industry. Sharat Chandra, co-founder of India Blockchain Forum said that it mandates entities dealing in crypto to follow KYC [know your customer], anti-money laundering regulations, and due diligence as followed by banking and other financial entities which fall under the classification of reporting entities under PMLA. Sumit Gupta, co-founder and CEO of Indian crypto exchange Coindcx commented: “Slowly but surely we are moving towards a regulated crypto ecosystem.“ Ashish Singhal, co-founder of crypto investing app Coinswitch opined: “Finance Ministry’s notification to bring VDAs [virtual digital asset] transactions under PMLA is a positive step in recognizing the sector. This will strengthen our collective efforts to prevent VDAs from being misused by bad actors.“
G20 Summit & IMF/FSB Collaboration
The government of India recently led discussions on cryptocurrency regulation among G20 finance ministers and central bank governors. At the conclusion of this meeting for finance chiefs, India asked International Monetary Fund (IMF) and Financial Stability Board (FSB) to collaborate on a joint paper to help countries formulate comprehensive crypto policies. India’s Finance Minister Nirmala Sitharaman also spoke about this collaboration at an event held earlier in June 2021.
Conclusion
Overall this move is seen as a positive step towards recognizing cryptocurrencies within India’s economy while further strengthening efforts against misuse by bad actors through money laundering laws such as PMLA. With G20 leaders discussing ways to regulate cryptocurrencies across countries with IMF and FSB collaborations, we can expect further clarity regarding these regulations in near future.