Crypto Trade under Money Laundering Laws

In an effort to tighten the oversight of digital assets, the government has imposed money laundering provisions on cryptocurrencies or virtual assets as it looks to tighten oversight of digital assets. This is an important development vis-a-vis cryptocurrency in India and as such, is a topic relevant for the IAS exam economy segment.

Crypto Trade comes under Money Laundering Laws

The government has imposed provisions of anti-money laundering legislation on crypto trading, safekeeping and related financial services.

• Now onwards, Indian crypto exchanges will have to report suspicious activities to the Financial Intelligence Unit India (FIU-IND).
• This action aligns with the worldwide trend of mandating that digital asset platforms adhere to anti-money laundering protocols.
• Crypto assets, Web3 and other virtual assets are new and evolving sectors and need international collaboration in framing effective legislation.
• Budget 2022-23 introduced a 30% tax on income from cryptocurrency and other virtual assets
• A 1% tax deduction at source (TDS) was also introduced on transactions in similar assets above a threshold limit. Gifts in crypto and digital assets were also taxed.

Read more on the Prevention of Money Laundering Act in the linked article.

Additional Information:-

• Cryptocurrency: A cryptocurrency or crypto, is a virtual currency secured by cryptography. It is designed to work as a medium of exchange, where individual ownership records are stored in a computerized database.
• Virtual digital asset: It is any code or number or token generated through cryptographic means with the promise or representation of having inherent value.
• Money laundering: Money laundering involves disguising the origin of substantial sums of money obtained through illegal activities such as drug trafficking, terrorist financing, and corruption, to make it appear as if it was acquired through lawful means.
• Financial Intelligence Unit India (FIU-IND): It is an organization under the Department of Revenue, which collects financial intelligence about offenses under the Prevention of Money Laundering Act, 2002.

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