India Imposes AML Laws on Crypto Transactions

  • Cryptocurrency activities in India took a hit after the country introduced a 30% tax on digital holdings last year.
  • Statistics show that most Indians prefer dealing with foreign exchange, while some start-ups have moved to other countries with more friendly rules.

India, for the first time, has added crypto to its anti-money laundering rules. This means NFT marketplaces, crypto exchanges, and custody service wallet providers are legally responsible for keeping an eye on questionable financial activity. According to the Prevention of Money Laundering Act (PMLA), the organizations would need to register with the Financial Intelligence Unit (FIU) and follow other requirements.

Although India lacks a specific regulatory authority for cryptocurrencies, this move gives the FIU substantial responsibility for overseeing cryptocurrencies in India. Prior to this time, crypto companies were not required by law to carry out verification procedures like Know Your Customer (KYC). However, this has become mandatory. Furthermore, to comply with the law, crypto businesses will need to voluntarily submit reports of unusual activity to the FIU and designate a Money Laundering Reporting Officer (MLRO).

According to Shashi Jha, a partner at Jigsaw Law, “crypto businesses would be required to have a customer due diligence and record management program in place and now they will have to mandatorily maintain transaction records related to crypto business. Earlier, there was no avenue to submit suspicious transaction reports for these businesses.”

The announcement, which was released as regulators around the world tighten AML regulations for cryptocurrency, will make it more difficult for Indian crypto businesses to operate. Unfortunately, crypto companies have found it difficult to operate in India in recent months.

Last year, authorities in India subjected holdings and transfers of digital assets to a 30% tax. Cryptocurrency activities in India took a hit as a result of the news. Trading volume across the top exchanges in the Asian country reported a drop of 70% within 10 days of the tax policy. The figures rose to 90% in the following three months. The strict tax laws also prompted budding crypto projects to leave India and drove cryptocurrency traders to foreign exchanges.

Interestingly, the declining figures have not deterred Indian authorities from imposing more strict policies. The country’s regulators once again displayed their harsh stance on cryptocurrencies last month by completely banning cryptocurrency sponsorships and advertising in the women’s cricket league. This followed a similar ban for the men’s Premier League in 2022. 

Recently, Nirmala Sitharaman, India’s finance minister, also called for global cooperation to control cryptocurrencies. It remains to be seen if the new policy will positively affect crypto activities in India.

Lawrence Woriji
Lawrence Woriji Verified Author

I have covered some exciting stories in my career as a journalist and find blockchain-related stories very intriguing. I believe Web3 will change the world and want everyone to be a part of it.

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