VDAs Brought Under PMLA, Exchanges To Be Reporting Entities
Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Author of Cyber Scams in India, Digital Arrest, The Money Trap and The Human Hack
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By Sunil Garodia
First publised on 2023-03-09 06:24:39
About the Author
Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Author of Cyber Scams in India, Digital Arrest, The Money Trap and The Human Hack
View all posts by this Author
In a move to bring India's crypto regulations at par with the worldwide trend, the government issued a gazette notification on Tuesday to bring virtual digital asset transactions under the Prevention of Money Laundering Act (PMLA). The Financial Action Task Force (FATF) defines a virtual asset as "a digital representation of value that can be digitally traded, transferred and used for payment or investment purposes." FATF sets international standards aimed at preventing money laundering and terrorist financing. India's latest move is in line with FATF recommendations.
Henceforth, "exchange between virtual digital assets and fiat currencies, exchange between one or more forms of virtual digital assets, transfer of virtual digital assets (VDA), 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 under PMLA, as per the gazette notification.
Further, all entities or exchanges dealing in VDAs will now act as reporting entities under PMLA. This means that like banks, financial institutions including stock brokers as well as real estate and jewellery sectors and casinos, entities dealing in VDAs will now have to maintain a record of all transactions, ensure that all their customers and users, registered or one-time, are KYC compliant and report all suspicious activity to the Financial Intelligence Unit India. The government has also said that it will penalise or even shut down entities dealing in VDAs if they do not comply with the latest changes.
Given the fact that crypto affords anonymity and can be used for financial fraud, tax evasion, moving money from one country to another, terror funding activities and for a host of other illegal financial activities not possible through legal financial channels, this move on part of the government is welcome. It means that those who use crypto can no longer use it for illegal activities as they have to provide their credentials and the transactions can be reported and traced.
Although India has not made crypto legal yet, it has slapped a 30% tax on all income from dealing in VDAs and has also prescribed deduction of 1% TDS on all transaction to ensure that they do not escape the tax net. This latest move will further tighten the grip on VDA transactions to ensure that individuals or entities do not use it for illegal activities.
