Crypto Under PMLA 

Cryptocurrency Trading

• Bitcoin is the topmost traded cryptocurrency, but it’s not the only kind of cryptocurrency. Currently, there are more than 22,000 cryptocurrencies like Ethereum, Polkadot, Solana, Dogecoin etc.
• Just like the stock market, the crypto market has exchanges or brokers which act as facilitators. These exchanges often charge a fee or commission for each transaction.
• Crypto exchanges rely on investors for the possession of cryptocurrency. This happens when users deposit crypto to sell and some new users come to the exchange to buy it—thereby, facilitating trading.

Transactions To Be Covered Under PMLA

• Exchange between virtual digital assets (VDAs) and fiat currencies;
• Exchange between one or more forms of VDAs;
• Transfer of VDAs;
• Safekeeping or administration of VDAs or instruments enabling control over VDAs; Participation in and provision of financial services related to an issuer’s offer and sale of a VDA.

Reasons For The Current Move (Crypto Under PMLA)

• A July 2021 report had estimated India as being the country with the highest number of crypto owners, at 10.07 crore, which was more than threefold the number of owners of crypto assets in the second-ranked U.S.
• Disclosures by the government indicate that the volume of trade in unregulated virtual assets has grown sizeably in recent years.
• Last month, Ministry of Finance informed the Lok Sabha that the Enforcement Directorate was investigating several cases related to cryptocurrency frauds wherein a few crypto exchanges had been found involved in money laundering.
• As much as ₹936 crore had been attached or frozen as on January 31, deemed to be proceeds of crime.
• Bringing VDAs under PMLA now lays the responsibility of highlighting the origin of all activity, including safekeeping, in such assets upon individuals and businesses participating in or facilitating these transactions.

Legal Status Of Crypto In India

• In the Union Budget last year, even though the government brought in a tax for cryptocurrencies, it did not proceed with framing regulations.
• Earlier, the Reserve Bank of India had proposed a ban that was set aside by a court order. In July last year, flagging the RBI’s concerns, the finance minister told the Parliament that international collaboration would be needed for any effective regulation or ban on cryptocurrency.
• From April 2022, India introduced a 30 per cent income tax on gains made from cryptocurrencies.
• In July 2022, rules regarding 1 per cent tax deducted at source on cryptocurrency came into effect.

Legal Status Of Crypto In India

• In the Union Budget last year, even though the government brought in a tax for cryptocurrencies, it did not proceed with framing regulations.
• Earlier, the Reserve Bank of India had proposed a ban that was set aside by a court order. In July last year, flagging the RBI’s concerns, the finance minister told the Parliament that international collaboration would be needed for any effective regulation or ban on cryptocurrency.
• From April 2022, India introduced a 30 per cent income tax on gains made from cryptocurrencies.
• In July 2022, rules regarding 1 per cent tax deducted at source on cryptocurrency came into effect.

IMF Guidelines On Crypto

Recently, the International Monetary Fund has also laid out a nine-point action plan for countries to treat crypto assets: The nine elements—or policy actions—are:

• Safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto assets official currency or legal tender status.
• Guard against excessive capital flow volatility and maintain effectiveness of capital flow management measures.
• Analyze and disclose fiscal risks and adopt unambiguous tax treatment of crypto assets.
• Establish legal certainty of crypto assets and address legal risks.
• Develop and enforce prudential, conduct, and oversight requirements to all crypto market actors.
• Establish a joint monitoring framework across different domestic agencies and authorities.
• Establish international collaborative arrangements to enhance supervision and enforcement of crypto asset regulations.
• Monitor the impact of crypto assets on the stability of the international monetary system.
• Strengthen global cooperation to develop digital infrastructures and alternative solutions for cross-border payments and finance.