How the Indian exchanges reacted to the Crypto PMLA rule
The Indian government on 7 March had issued a notification on crypto trading and VDAs.
Now money laundering provisions will be applied on the Indian crypto sector
The crypto exchanges in the country have lauded this move
The Union Finance Ministry issued a notice on Tuesday bringing crypto trading, virtual digital assets (VDAs), and related financial services under the ambit of the Prevention of Money Laundering Act (PMLA) 2002.
With the imposition of the PMLA, any financial wrongdoing involving crypto assets can now be scrutinised by the ED (Enforcement Directorate).
What does the Act say?
The Indian government, via a notification dated 7 March 2022, brought cryptocurrencies, exchange, and transfers of VDAs to fall under the purview of the PMLA. Now, money laundering provisions would imply to the country’s crypto industry as the government seeks to tighten its control over digital assets in the country.
As per the notification, VDA businesses have now become ‘reporting entities’ and are mandated to follow reporting standards and KYC norms, similar to the lines of banks, and payment system operators, among others.
What has been India’s stance on cryptos?
It must be noted that last year, even though the government brought in a tax on cryptocurrencies, it did not announce the framing of regulations. In fact, RBI’s Deputy Governor, T Rabi Sankar, had even called for an outright ban on cryptocurrencies, likening them to Ponzi schemes.
From April 2022, India announced levying a 30 percent income tax on gains made from cryptocurrencies. Moreover, in July 2022, rules pertaining to 1 percent TDS on cryptocurrency came into effect.
As a result of harsh tax policies slapped on Indian crypto investors, a majority of them have moved away from domestic exchanges to foreign cryptocurrency exchanges. In fact, these tax laws crippled the trade activities across Indian crypto exchanges.
How have crypto exchanges reacted to this move?
However, the latest notification by the Centre is viewed positively by the Indian crypto sector. Experts believe that new rules would prevent the misuse of crypto, for instance, money laundering, etc.“This notification will help establish greater transparency in the ecosystem and this is a welcome positive step in strengthening the India VDA sector. It’ll also help establish a common standard across all VDA platforms operating in India,” states Ashish Singhal, CEO & Co-Founder, CoinSwitch.
Further, the latest move by the Indian government signals that global economies are recognising the importance of having clear regulations and are also working towards protecting the interests of crypto investors.