Cryptocurrency transactions under PMLA provisions

The finance ministry announced today that cryptocurrencies transactions would come under the ambit of money laundering provisions. In a notice, the government said that participation in transactions involving virtual assets would be in the Prevention of Money Laundering Act PMLA. This move is the latest step taken by the government to tighten oversight of digital assets.

In the gazette, the ministry warned investors against participation in and provision of financial services related to an issuer's offer and sale of a virtual asset. The notification said that the exchange and transfer of virtual assets would fall under PMLA laws.

Ashish Singhal, co-founder of CoinSwitch, said the notification to bring VDA transactions under PMLA was a positive step in recognition of the sector.

According to the Income Tax Act, a virtual asset is any information, code, number, or token that is not Indian currency or foreign currency generated through cryptgraphic means or otherwise and can be called by whatever name.

The Enforcement Directorate, which has the responsibility to investigate money laundering and forex violations cases, has already been looking into the exchanges CoinSwitch Kuber and WazirX.

The move by India aligns with the trend of requiring digital-asset platforms to follow anti-money laundering standards similar to those followed by other regulated entities like banks or stockbrokers, said Jaideep Reddy, counsel at law firm Trilegal.