The Indian government has taken a significant step in the regulation of the crypto industry. The Finance Ministry has brought crypto or virtual asset businesses under the Prevention of Money Laundering Act, 2002 (PMLA). This move has been praised by industry insiders, who see it as legitimizing the sector further, amidst growing concerns of possible bans and regulations.
Industry participants and insiders have also welcomed the implementation of Know Your Customer (KYC) policies to prevent fraudulent activities. According to a recent notification, Indian crypto exchanges will now be required to report any suspicious activity to the Financial Intelligence Unit-India (FIU-IND). All crypto exchanges and mediators dealing with virtual digital assets are duty-bound to have complete KYC records for each and every customer they accept.
The inclusion of crypto and virtual digital assets (VDA) trading under the PMLA was one of the key recommendations in the Bharat Web3 Association’s (BWA) budget submission and IndiaTech.org’s whitepaper in 2021. Rameesh Kailasam, CEO of IndiaTech.org, said, “IndiaTech.org had released a whitepaper on crypto in 2021. Under suspicious transaction reporting in that document, we had specifically mentioned that there needs to be a mechanism for monitoring such transactions. With this new notification, that will become clear.”
Nischal Shetty, the founder & CEO of WazirX, expressed his delight at the government’s step of regulating cryptocurrency in India. He also believes that this will ensure all crypto related businesses have to undertake necessary Know Your Customer (KYC), transaction monitoring & other processes as part of operation.
Ashish Singhal, co-founder and CEO of CoinSwitch, applauded the Finance Ministry’s notification to bring VDA transactions under the Prevention of Money Laundering Act (PMLA), as it is a positive recognition of the sector. This move further bolsters the efforts to ensure that VDAs are not exploited by malicious individuals. Sumit Gupta, co-founder and CEO of CoinDCX, expressed his delight about the new law and mentioned that his company had previous taken on the initiative to comply with these regulations before it was legally enforced.
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As these exchanges and intermediaries become ‘reporting entities’ under the PMLA, they will be required to keep a record of all transactions exceeding Rs. 10 lakhs for a minimum of five years. This move is an important step in the regulation of the crypto industry and will help prevent money laundering and terrorist financing. It will also help to address concerns about possible bans and regulations, and provide more legitimacy to the sector.
