The Indian government has notified crypto companies to comply with the Prevention of Money Laundering Act (PMLA) of 2002. The Gazette of India published a notification from the Ministry of Finance on March 7, subjecting a range of crypto transactions, including exchange, transfers, safekeeping, and administration of virtual assets, to the PMLA. Additionally, financial services related to an issuer’s offer and sale of virtual assets also fall under the PMLA.
AML standards for crypto
The move comes as regulators worldwide tighten Anti-Money Laundering (AML) standards for cryptocurrencies. While this is not a new requirement for the industry, the notification will complicate life for crypto companies in India.
Also Read: South Korea’s Crypto-Tracking System to Fight Money Laundering
According to the PMLA, financial institutions must maintain a record of all transactions for the past decade, provide these records when requested, and verify the identity of all clients. These requirements could be challenging for crypto companies, given the anonymity provided by virtual assets.
Impact of strict tax policy
In March 2022, India amended tax rules to subject digital asset holdings and transfers to a 30% tax. Within ten days of the new tax policy, trading volume on major cryptocurrency exchanges across India dropped by 70%. Over the next three months, it declined by almost 90%. The strict tax policy led crypto traders to offshore exchanges and forced budding crypto projects to move outside India.
Crypto advertising ban
In February 2023, Indian authorities preemptively banned crypto advertising and sponsorships in the local women’s cricket league, following a similar ban for the men’s cricket Premier League in 2022. The ban will further restrict the promotion of crypto in the country.
In 2023, India’s Finance Minister, Nirmala Sitharaman, urged international efforts to regulate crypto while celebrating India’s first presidency of the G20. Sitharaman called for a coordinated effort “for building and understanding the macro-financial implications” to reform crypto regulation globally.
