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Crypto transactions in India are now subject to AML laws

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(Kitco News) - As India works to gain control over its growing population of cryptocurrency users, the Indian government has officially notified all interested parties of their responsibility to adhere to the national Anti-Money Laundering (AML) laws when it comes to their crypto dealings.

According to a notification from the Ministry of Finance that was published in The Gazette of India on Tuesday, India has added digital asset-related activities to the list of behaviors that must follow AML rules, which means crypto exchanges, NFT marketplaces and custody service wallet providers are now legally responsible for monitoring suspicious financial activities.

Events specifically identified in the notification include, “exchange between virtual digital assets and fiat currencies; exchange between one or more forms of virtual digital assets; transfer of virtual digital assets; 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.”

All businesses that facilitate digital asset transactions are required to register with the Financial Intelligence Unit (FIU) and comply with other mandatory processes under the Prevention of Money Laundering Act (PMLA).

As part of the requirements of the PMLA, financial institutions are obligated to maintain a record of all transactions for the last ten years, provide these records to officials if demanded, and verify the identity of all clients.

This development places a lot of power over the fate of cryptocurrencies in India into the hands of the FIU, which has become the de facto regulator overseeing the crypto industry in the absence of a dedicated regulatory body. Up to this point, crypto companies were not legally required to perform verification processes like Know Your Customer (KYC).

Under the new regulatory regime, these companies must now report any suspicious activities to the FIU voluntarily and must designate a Money Laundering Reporting Officer (MLRO) to ensure compliance with the act.

Bankers aren't buying into India's ‘e-rupee' CBDC, and they doubt the public will either

The government of India has been one of the most stringent when it comes to regulating the crypto industry, and its 2023 budget held in place the restrictive crypto tax rules originally established in 2022. Currently, there is a 30% tax on all crypto profits and a 1% tax deducted at source (TDS) on all crypto transactions.

In addition to maintaining the high crypto tax rules, the government also added stipulations that could potentially lead to a fine or jail time for non-compliance with the TDS provision. The fine would be equivalent to the tax liability of the transaction while offenders also risk the possibility of spending three to 84 months in jail for failure to comply.

India is also well on its way to creating a central bank digital currency (CBDC), with the digital rupee currently in its pilot testing phase. In February, the digital rupee got a boost in use when Reliance Retail, India’s single-largest retailer and part of the country’s Reliance conglomerate, announced that it would begin accepting payments via the e-rupee in all 17,000 of its stores.

And in its role as president of the G-20, India is working with the International Monetary Fund (IMF) and the Financial Stability Board (FSB) to develop a regulatory approach for cryptocurrencies. During an interview in February, India's Finance Minister Nirmala Sitharaman stated that the G-20 is looking to establish a set of global standard operating procedures that can be agreed upon by member nations for the regulation of crypto assets.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.