PMLA, 2002 Amended To Include Cryptocurrency Trade: The Finance Ministry has amended the anti-money laundering law to include the trading of cryptocurrencies and other virtual digital assets. This means that exchanges, custodians, and wallet providers, among others in crypto-related trade, will fall under the Prevention of Money Laundering Act. As part of its efforts to tighten oversight of digital assets, the government has imposed money laundering provisions on cryptocurrencies or virtual assets.
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More about the amendment to PMLA, 2002
Things covered by the law
- Exchange between virtual digital assets and fiat currencies
- Exchange between one or more forms of virtual digital assets
- Transfer of virtual digital assets
- Safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets, and
- Participation in and provision of financial services related to an issuer’s offer and sale of a virtual digital asset will now be covered by the Prevention of Money-laundering Act, 2002.
Further, in regards to ownership, the ministry directed that any individual or group who holds about 10% ownership in the client of a ‘reporting entity’ will be seen as the beneficial owner as against the earlier threshold of 25% ownership.
Impact of the amendment in PMLA, 2002
Following this, Indian cryptocurrency exchanges will be required to report suspicious activity to the Financial Intelligence Unit India (FIU-IND). The move is consistent with a global trend of requiring digital-asset platforms to adhere to anti-money laundering standards similar to those observed by other regulated entities such as banks or stock brokers.
Virtual digital assets were defined as any code or number or token generated through cryptographic means with the promise or representation of having inherent value. Digital currency and assets like NFTs (non-fungible tokens) have gained traction globally over the last couple of years. Trading in these assets has increased manifold with cryptocurrency exchanges being launched. However, India, till last year, did not have a clear policy on either regulating or taxing such asset classes.