Finance ministry's move to regulate crypto under PMLA receives industry support

Crypto industry players praised the finance ministry's move to bring crypto or virtual asset businesses under the purview of the Prevention of Money Laundering Act, 2002. (PMLA). This only legitimises the sector further, according to industry insiders, amid mounting concerns about possible bans and regulations.

Additionally, industry participants and insiders supported the implementation of Know Your Customer (KYC) policies to prevent fraudulent activities.

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.

According to a March 7 gazette notification, Indian crypto exchanges will now be required to report any suspicious activity to the Financial Intelligence Unit-India (FIU-IND). The notification also mandates that crypto exchanges and intermediaries dealing with virtual digital assets (VDAs) must have proper KYC documentation for all customers they onboard.

Rameesh Kailasam, CEO, IndiaTech.org told Moneycontrol, "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, founder and CEO, WazirX said, “This is a good step towards regulating the crypto industry in India. This also ensures all crypto businesses must perform necessary KYC, transaction monitoring, etc. as part of their process.”

“Finance Ministry's notification to bring VDA transactions under PMLA is a positive step in recognizing the sector. This will strengthen our collective efforts to prevent VDAs from being misused by bad actors,” said CoinSwitch co-founder and CEO Ashish Singhal.

Sumit Gupta, co-founder and CEO of CoinDCX, stated that his company has been voluntarily conducting these compliances for a while now and is happy to see it become a law.

“Slowly but surely, we are moving towards a regulated crypto ecosystem! Entities such as CoinDCX are now required by law to conduct due diligence and enhanced due diligence under the PMLA. We, at CoinDCX are committed to combating money laundering and terror financing,” Gupta said.

He added, “We have been looking for a way to share data with the FIU-IND for some time now, and are now delighted that this channel has been opened. My team and I are still looking at the fine print, such as the inclusion of the transfer of VDAs.”

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.