The Indian government has made a significant move to tighten its regulation of cryptocurrencies by bringing crypto transactions under the ambit of the Prevention of Money Laundering Act (PMLA). The move will have implications for investors and businesses dealing in virtual digital assets. Here’s what you need to know about the latest regulatory changes:
What is the Prevention of Money Laundering Act (PMLA)?
The Prevention of Money Laundering Act (PMLA) is a law enacted in 2002 by the Indian government to prevent money laundering and other financial crimes. Under the act, financial institutions, including banks, are required to report suspicious transactions to the authorities.
What does the latest notification say?
In a notification issued by the finance ministry, the government stated that participation in transactions involving virtual digital assets would be under the PMLA. The notification also warns investors against “participation in and provision of financial services related to an issuer’s offer and sale of a virtual digital asset.”
What are virtual digital assets?
According to the Income tax act, ‘virtual digital asset’ refers to any information, code, number, or token (not being Indian currency or foreign currency), generated through cryptographic means or otherwise and can be called by whatever name. This includes cryptocurrencies like Bitcoin and Ethereum.
What are the implications of the latest regulatory changes?
The latest regulatory changes mean that the exchange and transfer of virtual digital assets would also fall under PMLA laws. This move will allow the authorities to investigate cases of money laundering and forex violations involving cryptocurrencies. The Enforcement Directorate, which is responsible for investigating such cases, has already been probing crypto companies, including exchanges CoinSwitch Kuber and WazirX.
What should investors and businesses do?
Investors and businesses dealing in virtual digital assets should take note of the latest regulatory changes and ensure compliance with the PMLA. This may involve reporting suspicious transactions to the authorities and following other regulatory requirements.
In conclusion, the Indian government’s move to regulate crypto transactions under the PMLA is a significant step towards tightening oversight of digital assets. Investors and businesses dealing in virtual digital assets should take note of the latest regulatory changes and ensure compliance to avoid any potential legal issues.