NEW DELHI: In its latest step to tighten oversight of digital assets, the Centre has brought crypto trading, safekeeping and related financial services under the ambit of the Prevention of Money Laundering Act. The Union finance ministry issued a gazette notification to this effect on Tuesday.
Crypto exchanges and intermediaries dealing with virtual digital assets (
VDA
) will now be required to perform KYC of their clients and users of the platform. Besides, exchanges will have to report suspicious activity to the
Financial Intelligence Unit India
.
The notification says entities dealing in VDA will be considered "reporting entity" under PMLA-banks, financial institutions, entities engaged in real estate and jewellery sectors as well as casinos are 'reporting entities' now. Under this law, every reporting entity is required to maintain a record of all transactions.
Crypto entities have to maintain records
The Centre's move to bring the cryptocurrency sector under the ambit of PMLA is in line with the global trend of requiring digital-asset platforms to follow anti-money laundering standards similar to those followed by other regulated entities like banks or stock brokers.
A gazette notification issued said that "exchange between virtual digital assets and fiat currencies, exchange between one or more forms of virtual digital assets, transfer of virtual digital assets (VDA), safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets, and participation in and provision of financial services related to an issuer's offer and sale of a virtual digital asset" will be now be covered under the
Prevention of Money Laundering Act
, 2002.
The notification says entities dealing in VDA will now be considered 'reporting entity' under PMLA. Under this law, every reporting entity is required to maintain a record of all transactions, including the record of all cash transactions of more than Rs 10 lakh, for at least five years. They are also required to maintain a record of all series of cash transactions integrally connected to each other, which have been individually valued below Rs 10 lakh, where such series of transactions have taken place within a month and the monthly aggregate exceeds Rs 10 lakh.
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The recent move by the Centre in New Delhi to bring crypto trading, safekeeping, and related financial services under the ambit of the Prevention of Money Laundering Act (PMLA) reflects a global trend in regulating digital asset platforms. This aligns with the approach of many countries that require cryptocurrency entities to adhere to anti-money laundering (AML) standards similar to traditional financial institutions like banks or stock brokers.
Here are the key concepts discussed in the article:
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Inclusion under PMLA: The article mentions that crypto exchanges and intermediaries dealing with virtual digital assets (VDA) are now considered "reporting entities" under the Prevention of Money Laundering Act. This implies that they are subject to regulatory oversight similar to banks, financial institutions, and other sectors like real estate and casinos.
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KYC Requirements: Crypto entities are now required to perform Know Your Customer (KYC) procedures for their clients and platform users. This is a standard practice in the financial industry to verify the identity of customers and mitigate the risk of illicit activities.
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Reporting Suspicious Activity: The article highlights that exchanges will have to report suspicious activity to the Financial Intelligence Unit India. This reporting requirement is crucial for detecting and preventing money laundering and other financial crimes within the cryptocurrency space.
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Record-keeping Obligations: Under the PMLA, reporting entities, including crypto entities, are obligated to maintain records of all transactions. This includes a record of all cash transactions exceeding Rs 10 lakh, as well as records of series of cash transactions below Rs 10 lakh that are integrally connected within a month, with a monthly aggregate exceeding Rs 10 lakh. These records must be maintained for at least five years.
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Scope of Covered Activities: The notification specifies various activities related to virtual digital assets that fall under the Prevention of Money Laundering Act. These include the exchange between virtual digital assets and fiat currencies, exchange between different forms of virtual digital assets, transfer of virtual digital assets, safekeeping or administration of virtual digital assets, and participation in and provision of financial services related to an issuer's offer and sale of a virtual digital asset.
In summary, the inclusion of cryptocurrency activities under the PMLA signifies a significant step towards aligning digital asset regulations with global AML standards, ensuring a more robust and secure environment for crypto trading and related financial services.
