Although the imposition of anti-money laundering standards on cryptocurrencies is not a new concept, the government in India has recently taken the step of notifying all concerned parties about the requirement of complying with the national anti-money laundering law.
A New Requirement
Recently, the Gazette of India released a notice it received from India’s Ministry of Finance, which subjects various crypto-related transactions to the PMLA (Prevention of Money-Laundering Act) created in 2002. The Act contains information regarding the basic details of the exchange, safekeeping, transfer, and management of virtual assets, as well as financial services associated with trading virtual assets and the issuer’s offer.
Although the notification lacks specific details, financial institutions are required by the Prevention of Money-Laundering Act to keep records of every single transaction for the past decade, provide these records to officials upon request, and confirm the identity of all clients.
This notification arrives as global regulators tighten anti-money laundering standards for cryptocurrency. This notice will likely create additional challenges for Indian cryptocurrency firms, which have experienced difficulties recently.
Starting in March 2022, digital asset transfers and holdings will be liable to a 30% tax due to the revised tax regulations.
India’s Cryptocurrency Industry Is Collapsing
Within ten days of implementing the latest tax policy, trading volume on major crypto exchanges in India plummeted by 70%. The strict tax policy had crypto traders seeking offshore transactions, causing emerging cryptocurrency projects to relocate outside India.
Indian authorities reaffirmed their strict position on cryptocurrencies in Feb. 2023 by banning cryptocurrency sponsorships and advertising in the Women’s local cricket league. This action followed a similar ban on the cricket Premier League played by me in 2022
During the first presidency in India at the G20 in 2023, Nirmala Sitharaman— The finance minister, used the opportunity to advocate for international collaboration in regulating cryptocurrencies. She emphasized the importance of coordinated efforts to comprehensively understand and build the macro-financial significance of cryptocurrency, which could ultimately lead to global reform in its regulation.
The crypto industry in India is collapsing due to a challenging regulatory environment and high taxes, causing a significant loss of investors for Indian crypto exchanges.
Indian cryptocurrency exchange WazirX closed its NFT exchange unexpectedly last month, citing stunted traction and volume. According to the company, they only earned a fee of approximately $6 in the last 30 days, while their server costs amount to thousands of US dollars.