The Union government has brought cryptocurrencies under the Prevention of Money Laundering Act (PMLA), according to a notification issued on Tuesday, March 7. The notification states that the exchange of virtual digital assets (VDAs) with fiat currencies, the exchange between one or more forms of VDA, and the transfer of digital assets will now be covered under money laundering laws.
This means that any financial wrongdoing involving cryptocurrency assets can now be investigated by the Enforcement Directorate (ED). The extension of PMLA will give authorities greater power to monitor the transfer of cryptocurrency outside India.
This will also mean that investors will be subjected to greater scrutiny by agencies, and those found using VDAs to earn money illegally will be subjected to the same punishments as other money laundering activities. Entities dealing in VDAs will now be considered “reporting entities” under PMLA and will be required to maintain KYC details of their clients and beneficial owners.
Featured Videos on TNM
The government has been grappling with how to regulate or tax digital currency and assets like non-fungible tokens (NFTs) for some time. The lack of clarity has led to concerns over illicit activities such as money laundering, terrorism financing, and tax evasion. However, with the inclusion of VDAs under the PMLA, the government hopes to curb such activities and bring about greater transparency in the sector.
Over the last few years, digital currency and assets like non-fungible tokens (NFTs) have become increasingly popular worldwide. This has led to a manifold increase in trading these assets, facilitated by the launch of cryptocurrency exchanges. However, until last year, India had not established a clear policy for regulating or taxing these asset classes.
