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Indian Government Tightens Anti-Money Laundering Laws for Crypto Companies

The Indian government has notified all parties involved in cryptocurrency transactions to comply with national anti-money laundering (AML) laws. Published in The Gazette of India on March 7, the notification subjects various virtual asset transactions to the Prevention of Money-Laundering Act (PLMA) 2002. This includes the exchange, transfers, safekeeping, and administration of virtual assets and financial services related to an issuer’s offer and sale of virtual assets.

Financial institutions must maintain records of all cryptocurrency transactions for the last ten years and furnish these records to officials upon request. They must also verify the identity of all clients involved in cryptocurrency transactions.

The notification comes as regulators worldwide are tightening AML standards for cryptocurrency. It will undoubtedly complicate the working of cryptocurrency companies in India, which have already faced a challenging regulatory environment. Since March 2022, digital asset holdings and transfers have been subject to a 30% tax, causing trading volumes on major cryptocurrency exchanges in India to drop by 70% within ten days of the new tax policy and almost 90% in the next three months.

The stringent tax policy has driven crypto traders to offshore exchanges and forced budding crypto projects to move outside India. In February 2023, Indian authorities imposed a preemptive ban on cryptocurrency advertising and sponsorships in the local women’s cricket league, following a previous ban for the men’s cricket Premier League, introduced back in 2022.

As India celebrates its first presidency at G20 in 2023, the country’s Finance Minister, Nirmala Sitharaman, has called for coordinated international efforts to regulate cryptocurrency. Sitharaman urged a coordinated effort “for building and understanding the macro-financial implications” that could be used to reform crypto regulation globally.

The Indian government’s notification is the latest move in a global trend of increased cryptocurrency regulation. While many in the cryptocurrency community view these regulations as necessary for mainstream adoption, others argue that excessive regulation stifles innovation and drives users and businesses to offshore markets.


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