Big decision by Centre: Cryptocurrency, other digital assets to come under money laundering law

The Ministry of Finance has issued a Gazette notification announcing that all crypto businesses, including (exchanges, custodians, wallet providers etc) would come under the Prevention of Money-laundering Act, 2002 (PMLA).

New Delhi: In a major decision, the Central government has brought cryptocurrency businesses under money laundering provisions thus further strengthening the hold on the digital assets sector.

On Tuesday, the Ministry of Finance issued a Gazette notification announcing that all crypto businesses, including (exchanges, custodians, wallet providers etc) would come under the Prevention of Money-laundering Act, 2002 (PMLA).

“In exercise of the powers conferred by sub-clause (vi) of clause (sa) of sub-section (I) of section 2 of the Prevention of Money-laundering Act, 2002 (15 of 2003) (hereinafter referred to the as the Act), the Central Government hereby notifies that the following activities when carried out for or on behalf of another natural or legal person in the course of business as an activity for the purposes of said sub-sub-clause, namely:- (i) exchange between virtual digital assets and fiat currencies; (ii) exchange between one or more forms of virtual digital assets; (iii) transfer of virtual digital assets; (iv) safekeeping or administration of virtual digital assets or instruments enabling control over virtual digital assets; and (v) participation in and provision of financial services related to an issuer's offer and sale of a virtual digital asset,” read the Gazette notification.

“Explanation:- For the purposes of this notification "virtual digital asset" shall have the same meaning assigned to it in clause (47A) of section 2 of the Income-tax Act, 1961 (43 of 1961),” added the Ministry.

With the fresh notification, India has joined a global trend of imposing anti-money laundering standards on digital-asset platforms, similar to those applied to regulated bodies like banks and stock brokers. As part of this trend, India implemented strict tax rules on crypto in 2022, including a levy on crypto trading.

During the Union Budget 2023-24, Finance Minister Nirmala Sitharaman announced that any income from the transfer of digital assets would be taxed at a rate of 30%. The FM specified that no deduction for expenditure or allowance would be allowed when computing this income, except for the cost of acquisition.