Govt ropes in cryptocurrency trade in anti-money laundering law. How does it help market, investors?
3 min read . Updated: 09 Mar 2023, 10:27 PM IST
Premium- FinMin stated that the exchange between virtual digital assets and fiat currencies, the exchange between one or more forms of virtual digital assets, and the transfer of virtual digital assets --- will come under PMLA.
Finance Ministry has tweaked the anti-money laundering law by bringing cryptocurrencies and other virtual digital assets trade under the ambit. This means that exchanges, custodians, wallet providers, among others in crypto-related trade will fall under the Prevention of Money Laundering Act. Also, the ministry modified the definition of ownership in virtual assets. This move is seen as a positive by the cryptocurrency market.
In a notification on March 7th, FinMin stated that the exchange between virtual digital assets and fiat currencies, the exchange between one or more forms of virtual digital assets, and the transfer of virtual digital assets --- will come under PMLA.
Also, the safekeeping or administration of virtual digital assets and the participation in financial services related to the offer and sale of virtual digital assets --- will be covered under the Act.
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.
Reporting entities are banks and financial institutions, firms that are involved in sectors such as real estate and jewellery. The ministry has also included casinos and crypto or virtual digital assets.
Punit Agarwal, Founder of KoinX said, "The Government of India has recently made an official announcement stating that all crypto businesses, including exchanges, custodians, wallet providers, and others, will be subjected to the Prevention of Money Laundering Act of 2022 (PMLA). This move is a significant step forward in providing regulatory clarity for the crypto industry in India."
By bringing crypto businesses under the ambit of the PMLA, Agarwal highlighted that the Indian government is taking measures to ensure that the industry can operate in a regulated environment.
He said, "This will not only promote transparency but also aid in identifying and curbing the activities of bad actors within the industry. The collective efforts of the industry to prevent the misuse of crypto through money laundering and other illegal activities will also be strengthened as a result."
Furthermore, according to Agarwal, the move will enhance the legitimacy of the crypto industry in the eyes of the public. The inclusion of crypto businesses under the PMLA is a positive step towards establishing a robust regulatory framework that fosters growth while ensuring accountability and security.
Talking about the ownership, Dileep Seinberg, Founder & CEO, MuffinPay, Crypto Neobank said, as stated in the notification, "reporting entities" under the PMLA now include VDA-related entities. They will be required to maintain all customer information. Also, the extension of the PMLA will give the government more power to keep track of cryptocurrency transfers outside of India.
Seinberg added, "This is a positive step towards the regulation of the cryptocurrency industry in India. Additionally, this guarantees that all cryptocurrency businesses must include necessary KYC, transaction monitoring, and so on in their processes. Following the enactment of the PMLA, cryptocurrency companies will now be required by law to perform enhanced due diligence.
Following PMLA guidelines, custodians, administrators, and VDA exchanges that handle customer funds are now required to report questionable transactions just like banks. Seinberg added, "In contrast, enforcement agencies could directly rely on this amendment in the absence of regulators. This initiative will strengthen our collaborative efforts to prevent malicious actors from abusing VDAs."
Also, Seinberg said, the PMLA of 2022 authorizes the government to seize property acquired with illegal funds.
Lastly, Agarwal concluded, the Indian government's decision to bring crypto businesses under the PMLA is a welcome move that will undoubtedly benefit the industry as a whole. It is a testament to the government's commitment to promoting innovation while ensuring a safe and secure financial ecosystem.
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