<strong>Cryptocurrency Trade Will now Cover In Money laundering Laws</strong>
Cryptocurrency Trade Will now Cover In Money laundering Laws
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Cryptocurrency Trade Will now Cover In Money laundering Laws
Why In News:
In a gazette notification, the Finance Ministry said the anti-money laundering legislation has been applied to crypto trading, safekeeping and related financial services.
Why regulate cryptocurrencies?
2. Allow select cryptocurrencies: Thousands of cryptocurrencies exist around the world. They hardly have any knowledge about the thousands of other virtual assets. So, to protect customers, a regulatory authority clearing cryptocurrency is required, which can disclose all information about the performance of the digital assets, their risks, and potential.
3. Understanding risks associated with technology: Technology is advancing at a breakneck pace. Given the rapid rate of technological change, information infrastructure and professional financial advisors skilled in cryptocurrency are required. That way, investors can understand the technological risks of cryptocurrencies and make informed decisions.
4. Online fraud and cyber security risks: Investing in cryptocurrencies comes with another risk — online fraud. Hacking is a major threat worldwide, and cyber-attacks have become common.Through regulations, the authorities can implement measures to help cryptocurrency investors protect their assets.
5. Money laundering: Any unregulated system has the ability to fund criminal acts. As a result, a client due diligence process akin to that of a bank is required. This can help in keeping track of investors’ real identities and verifying their locations when they are buying or selling cryptocurrencies. Any infringement of such norms should be met with severe sanctions.
What is the recent move?
Indian crypto exchanges will have to report suspicious activity to the Financial Intelligence Unit India (FIU-IND).
The move is in line with the global trend of requiring digital-asset platforms to follow anti-money laundering standards similar to those followed by other regulated entities like banks or stock brokers.
Recent regulatory moves
In the Budget for 2022-23, finance ministry had brought a 30% tax on income from transactions in such assets.
Also, to bring such assets under the tax net, it introduced a 1% TDS (tax deducted at source) on transactions in such asset classes above a certain threshold.
Gifts in crypto and digital assets were also taxed.
Prevention of Money Laundering Act (PMLA), 2002?
Money laundering is the process of illegally concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement or gambling, by converting it into a legitimate source.
Background:
The PMLA was enacted in response to India’s global commitment (Vienna Convention) to combat the menace of money laundering. These include:
1. .United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988
2. Basle Statement of Principles, 1989
3. Forty Recommendations of the Financial Action Task Force on Money Laundering, 1990
4. Political Declaration and Global Program of Action adopted by the United Nations General Assembly in 1990.
About:
It is a criminal law enacted to prevent money laundering and to provide for confiscation of property derived from, or involved in, money-laundering and related matters.
It forms the core of the legal framework put in place by India to combat Money Laundering.
The provisions of this act are applicable to all financial institutions, banks (Including RBI), mutual funds, insurance companies, and their financial intermediaries.
Note
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Tags: Ministry of Finance, Reserve Bank of India, Cryptocurrency.
