Anti Money Laundering applicable on offshore crypto exchanges
Ministry of Finance in Lok Sabha on December 4 said that off-shore crypto exchanges such as Binance, Paxful, Kraken and others will be required to follow anti-money laundering and countering the financing of terrorism (CFT) guidelines under PMLA besides getting registered in the country to provide service to users. These provisions already apply to the Indian crypto exchanges such as WazirX, CoinDCX, etc
This development represents a significant relief and victory for Indian cryptocurrency exchanges. Over the past couple of years, these exchanges have witnessed a decline in trading volumes as users shifted to offshore platforms to avoid a 30 percent tax on income and gains from virtual digital assets (VDAs) and a 1 percent TDS on transactions exceeding Rs 10,000.
In response to queries from Lok Sabha member Lavu Sri Krishna Devarayalu regarding the registration of offshore crypto entities, Pankaj Chaudhary, the junior minister in the Ministry of Finance, affirmed that guidelines and reporting requirements are applicable to offshore crypto exchanges serving the Indian market. The registration process for Virtual Digital Asset Service Providers (VDA SPs) has been initiated.
Chaudhary also stated, "Appropriate action under the Prevention of Money Laundering Act, 2002, shall be initiated in cases of non-compliance by offshore platforms." In March 2023, cryptocurrency and virtual asset businesses were brought under the purview of the Prevention of Money Laundering Act, necessitating crypto exchanges to report any suspicious activity to the Financial Intelligence Unit-India (FIU-IND).
Our Opinion
Adhering to the Prevention of Money Laundering Act (PMLA) is paramount as it directly relates to the safety and financial well-being of Indian citizens. Unfortunately, citizens engaging with unregistered platforms expose themselves to the potential involvement of unscrupulous and malicious entities, putting both their present and future financial security at risk.
The readiness of the Government to take decisive actions in instances of non-compliance by such unregistered offshore entities is a positive and reassuring development.
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