Belated but Essential

In a gazette notification, the Finance Ministry said the anti-money laundering legislation has been applied to crypto trading, safekeeping and related financial services.

• After this, Indian crypto exchanges will have to report suspicious activity to the Financial Intelligence Unit India (FIU-IND).

Issues with crypto currencies

• Criminal misuse: FATF has been continuously flagging the potential that virtual digital assets have for criminal misuse considering the speed and anonymity. 
• Absence of a regulatory framework: Few countries have moved to regulate virtual assets, while a majority have not taken any action. It has created a global system with loopholes for criminals and terrorists to abuse.
• Money laundering: ED was ‘investigating several cases related to cryptocurrency frauds wherein a few crypto exchanges had been found involved in money laundering’.

Steps taken in India

• Application of PLMA: The Government placed all transactions involving virtual digital assets under the purview of the Prevention of Money Laundering Act (PMLA). 
• Introduction of a tax regime: Government has introduced the tax regime for the virtual digital assets in previous year’s Budget. 
• Draft legislation: Government has formulated the draft legislation seeks to prohibit mining, holding, selling, trade, issuance, disposal or use of cryptocurrency in the country.