India Implements AML Standards on Crypto

In a move that is not entirely surprising, the Indian government has implemented anti-money laundering (AML) standards on crypto. The Ministry of Finance published a notification in The Gazette of India on March 7, subjecting a range of crypto transactions to the Prevention of Money-Laundering Act (PLMA) 2002. This includes the exchange, transfers, safekeeping, and administration of virtual assets, as well as financial services related to an issuer’s offer and sale of virtual assets.

The PLMA obliges financial institutions to maintain a record of all transactions for the last ten years, provide these records to officials if demanded, and verify the identity of all clients. While the notification does not provide many details, it will complicate the life of crypto companies in India, as regulators worldwide are tightening AML standards for crypto.

This notification comes after the Indian government amended tax rules in March 2022, subjecting digital assets holdings and transfers to a 30% tax. This drove crypto traders to offshore exchanges and forced budding crypto projects to move outside India. Trading volume on major cryptocurrency exchanges across India dropped by 70% within 10 days of the new tax policy and almost 90% over the next three months.

In February 2023, Indian authorities again demonstrated their tough stance on cryptocurrencies with a preemptive ban on crypto advertising and sponsorships in the local women’s cricket league. This followed a previous ban for the men’s cricket Premier League, introduced back in 2022.

Despite the tough stance, India’s Finance Minister, Nirmala Sitharaman, urged international efforts to regulate crypto in 2023. While celebrating India’s first presidency of the G20, she called for a coordinated effort “for building and understanding the macro-financial implications,” which could be used to reform crypto regulation globally.

Overall, India’s implementation of AML standards on crypto will make it more challenging for crypto companies to operate in the country. However, the move is part of a wider global trend of regulators tightening AML standards for crypto, in an effort to curb illicit activities and promote greater transparency in the industry.