The government has said that Prevention of Money Laundering Act, 2002 will apply to trade in cryptocurrencies or virtual assets. In a notification, Ministry of Finance has said that the exchange between virtual digital assets and fiat currencies, the exchange between one or more forms of virtual digital assets and the transfer of virtual digital assets will be covered under money laundering act. Besides, the safekeeping or administration of virtual digital assets and the participation in financial services related to the offer and sale of virtual digital assets will also come under the preview of the Act. Last year India applied more stringent tax rules on the crypto sector, including applying a levy on trading. Those moves, as well as a global rout in digital assets, caused a plunge in domestic trading volumes.
India is yet to finalise legislation and regulations surrounding cryptocurrencies even as the country’s central bank has cautioned against their use multiple times.The Reserve Bank of India has said that cryptocurrencies should be banned as they are akin to a Ponzi scheme. Extending India’s money laundering rules to cryptocurrencies will give authorities greater authority in monitoring the transfer of these assets beyond the country’s borders.