Crypto regulation in India is tightening as the finance ministry has notified that crypto or virtual asset businesses will now be under the ambit of the Prevention of Money Laundering Act, 2002 (PMLA).
This means Indian crypto exchanges will have to report suspicious activity to the Financial Intelligence Unit India (FIU-IND) and follow the same KYC, anti-money laundering regulations, and due diligence as banking and other financial entities.
The goal of India’s move
The move by India aligns with a global trend of requiring digital-asset platforms “to follow anti-money laundering standards similar to those followed by other regulated entities like banks or stockbrokers,” said Jaideep Reddy, counsel at law firm Trilegal. Sharat Chandra, Co-Founder of India Blockchain Forum, called the notification a great step towards compliance.
Sumit Gupta, co-Founder and CEO of CoinDCX, a crypto exchange, added, “Slowly but surely, we are moving towards a regulated crypto ecosystem!”
This means that entities such as CoinDCX are now required by law to conduct due diligence and enhanced due diligence under the PMLA.
Notification provides more clarity on transactions under PMLA
The Gazette of India published a notification from the Ministry of Finance on March 7, subjecting a range of crypto transactions to the Prevention of Money-Laundering Act (PMLA) 2002, including the exchange, transfers, safekeeping, and administration of virtual assets. Financial services related to an issuer’s offer and sale of virtual assets also fall under the PMLA.
The PMLA obliges financial institutions to maintain a record of all transactions for the last ten years, provide these records to officials if demanded, and verify the identity of all clients.
While imposing Anti-Money Laundering (AML) standards on crypto is not new, it is only now that the Indian government has decided to notify all interested parties of the obligation to comply with the national AML law.
Impact on crypto market
Last year, India applied more stringent tax rules on the crypto sector, including a levy on trading. These moves, as well as a global rout in digital assets, caused a plunge in domestic trading volumes.
The latest anti-money laundering measure “is concerning as implementing the requisite compliance measures is likely to require time and resources,” Reddy said.
However, while the notification will complicate the life of crypto companies in India, it provides much-needed clarity and compliance in an otherwise uncertain market.
The move by the Indian government is a step towards a regulated crypto ecosystem, and entities such as CoinDCX are already complying with the new regulations.