India subjects crypto transactions to anti-money laundering law

While there is nothing new about imposing anti-money laundering (AML) standards on cryptocurrencies, it is only now that the Indian government has decided to notify all interested parties of the obligation to comply with the national AML law.

On March 7, The Gazette of India published a notice from the Ministry of Finance, which made a series of crypto transactions subject to the Prevention of Money-Laundering Act (PLMA) 2002 – namely the exchange, transfer, custody and administration of virtual assets. Financial services related to the offering and sale of virtual assets by an issuer are also covered by the PMLA.

The report does not contain many details, but the PML law requires financial institutions to keep track of all transactions over the past ten years, provide this data to the officials upon request and verify the identity of all customers.

Written just in time as regulators around the world tighten AML standards for crypto, the notification will nevertheless complicate the lives of crypto companies in India. And it hasn’t been too comfortable in recent years. As of March 2022, under amended tax rules, the possession and transfer of digital assets will be subject to a 30% tax.

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Trading volume on major cryptocurrency exchanges across India fell by 70% within 10 days of the new tax policy and by nearly 90% in the next three months. Rigid tax policies drove crypto traders to offshore exchanges and forced nascent crypto projects to move outside of India.

In February 2023, Indian authorities again showed their tough stance on cryptocurrencies with a pre-emptive ban on crypto advertising and sponsorship in the local women’s cricket league. This followed a previous ban on men’s Premier League cricket, which came into effect in 2022.

In 2023, while celebrating India’s first presidency at the G20, the country’s Finance Minister Nirmala Sitharaman pushed for international efforts to regulate crypto. She called for a coordinated effort “to build and understand the macro-financial implications,” which could be used to reshape crypto regulation globally.