Govt tightens crypto norms, brings all transactions under the ambit of PMLA

The cryptocurrency sector, which has been facing regulatory uncertainties in the country, has welcomed the move of the government hoping that it would be the precursor to recognising the industry.
Cryptocurrency (Photo | PTI)
Cryptocurrency (Photo | PTI)

NEW DELHI: In order to check the use of cryptocurrencies for illegal activities, the government has decided to bring all transactions through virtual digital assets under the Prevention of Money laundering Act (PMLA). 

In a gazette notification issued late on Tuesday night, the government has brought transactions involving cryptocurrencies between two legal persons – exchange between crypto and fiat currency, between two currencies, transfer and safe keeping of cryptocurrencies as well as participation in any sale or offer of cryptocurrencies – under the provisions of the PMLA.

Money laundering means converting ill-gotten money to legal money by using complex financial transactions to hide the actual source of generation of the money. Bringing transactions under the purview of PMLA not only enables prevention of integration of illegal money into the legal financial system but also punishment of the culprits and seizure of the proceeds of crimes.

The cryptocurrency sector, which has been facing regulatory uncertainties in the country, has welcomed the move of the government hoping that it would be the precursor to recognising the industry. Nischal Shetty, CEO and founder of WazirX, tweeted that this is a good step towards regulating the crypto industry in India. “This also ensures all crypto businesses must perform necessary KYC, transaction monitoring etc as part of their process,” said Shetty.

A spokesperson from Coinswitch, a crypto investing app, said the new rules will prevent misuse of crypto, such as money laundering, and they do not stop the regular, KYC-verified conversion of crypto into Indian rupees. “We took a conscious decision in 2021 to limit crypto movement within our KYC-compliant ecosystem to ensure transparency and compliance with the laws of the land,” the spokesperson added.

RBI wants outright ban
RBI has been calling for outright ban of private cryptocurrencies in the country terming them as a risk to financial stability of the country, but the government has not been able to express its clear stand on the issue. The government has, instead, decided to levy a heavy tax of 30% on capital gains from sale of crypto plus 1% TDS on crypto transactions 

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