The Indian government has brought virtual asset businesses, including cryptocurrencies, under the Prevention of Money Laundering Act (PMLA), which means that Indian crypto exchanges will now have to report suspicious activities to the Financial Intelligence Unit India (FIU-IND).
The new regulation applies to services such as trading in VDA-fiat, VDA-VDA or storing and managing VDA. VDA (Virtual Digital Assets) is defined in Clause (47A) of Section 2 of the Income-Tax Act of 1961.
The Ministry of Finance’s gazette notification clarified that providing financial services related to an issuer’s offer and sale of virtual digital assets would also fall under the scope of PMLA.
“Participation in and provision of financial services related to an issuer’s offer and sale of a virtual digital asset… For the purposes of this notification ‘virtual digital asset’ shall have the same meaning assigned to it in Clause (47A) of Section 2 of the Income-Tax Act, 1961 (43 of 1961),” the notification mentioned.
The notification also mentioned that VDA shall have the same meaning as given to it in clause (47A) of section 2 of the Income Tax Act of 1961.
The notification has been welcomed by the Indian crypto industry as a significant step towards compliance, requiring entities to follow Know Your Customer, anti-money laundering regulations and due diligence similar to banking and other financial entities that fall under the classification of reporting entities under PMLA.
Sharat Chandra, Co-Founder India Blockchain Forum, believes that this notification is a great step towards compliance.
“It mandates entities dealing in crypto to follow KYC, anti-money laundering regulations and due diligence as followed by banking and other financial entities which fall under the classification of reporting entities under PMLA,” Sharat told Moneycontrol.
Indian crypto exchange CoinDCX CEO, Sumit Gupta, said: “Slowly but surely, we are moving towards a regulated crypto ecosystem.”
“Entities such as CoinDCX are now required by law to conduct due diligence and enhanced due diligence under the PMLA,” Sumit added.