Crypto Trade Now Under Money Laundering Act in India [UPSC Current Affairs] (2024)

FAQs

Is cryptocurrency money laundering in India? ›

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).

Legal Status of Cryptocurrency in India

However, trading and investing in crypto is not illegal. The Indian government has implemented a 30% tax on income from the transfer of digital assets and a 1% TDS on transactions exceeding INR 50,000 annually.

Is Cryptocurrency In India Legal or Not? Cryptocurrencies are not regulated by any central authority in India as a payment medium. There are no rules, regulations, or guidelines for settling disputes while dealing with cryptocurrency. So, trading in cryptocurrency is done at investors' risk.

Cryptocurrencies are not illegal in India, meaning individuals can buy, hold, and trade cryptocurrencies. However, the Indian government and regulatory bodies have expressed concerns over the risks associated with cryptocurrencies and have been working towards establishing a regulatory framework.

Cryptocurrencies as a payment medium are not regulated or issued by any central authority in India. There are no guidelines laid down for sorting disagreements while dealing with cryptocurrency. So, if you wish to trade crypto, do it at your own risk.

The FIU banned cryptocurrency exchanges like Binance, Kraken, Kucoin, and others in India. The Director FIU IND wrote to the Secretary of Meity to block these exchanges as they were illegally operating without following the provisions of the PML Act in India.

In the present time, India does not have any Law or provision which specifically deal with Cryptocurrency. Although Government is coming with a bill to ban Cryptocurrency in India. Bu with this also, Government is also launching its own Digital currency.

India considers crypto to be a virtual digital asset and levies 30% tax (with 4% cess and any applicable surcharge) on profits from trading cryptos.

The Supreme Court observed that as on date the virtual currencies are not banned, but trading in virtual currencies and functioning of virtual currencies exchanges are severely impacted by the RBI Circular as their lifeline namely, the interface with the regular banking sector has been disconnected.

What is the future of crypto in India? ›

The cryptocurrency market has seen growth and challenges. Different countries have varying views on crypto. India is developing a crypto market with predicted growth in NFTs, play-to-earn gaming, decentralized finance, and changes in centralized exchanges.

In the case of cryptocurrency, companies or governments cannot produce new units and have not so far provided backing for other firms, banks, or corporate entities that hold asset value measured in it. The underlying technical system upon which cryptocurrencies are based was created by Satoshi Nakamoto.

Money launderers utilise crypto tumblers for high-value illicit crypto transactions. That is why the service lands in a grey area; it's not completely unlawful, but it's also a useful tool to launder money. Currently, there are nearly 400 crypto exchanges available globally.

Cryptocurrency Money Laundering Risks

Lack of identity makes it difficult to keep track of transaction source and destination, especially on platforms with weak AML and KYC measures.

India is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.

A 30% tax on gains from cryptocurrencies has been applicable since April 1st, 2022. Additionally, a 1% TDS has been effective from July 1st, 2022.